The Securities and Exchange Board of India (SEBI) has pulled up Bank of America’s Indian securities arm for lapses in internal controls and handling of confidential information during a March 2024 block sale of Aditya Birla Sun Life AMC shares, according to people familiar with the matter.
In a show-cause notice issued last October, the regulator alleged that the merchant banker failed to ring-fence unpublished price-sensitive information (UPSI) while managing a large share sale, potentially exposing unpublished price-sensitive information beyond the designated deal team ahead of the public announcement.
Sources said the regulator’s action may not be confined to a single transaction but reflects broader governance concerns that have been flagged at the bank over the past two years.“There have been repeated issues around insider-trading controls and internal processes in their merchant banking business,” a regulatory source said.
“The processes and guardrails were weak. SEBI had issued multiple administrative warnings earlier, on the understanding that these were not serious violations.” The bank, the source said, had assured the regulator that it was taking corrective measures, including tightening internal processes and making personnel changes. Further, teams from Hong Kong and Singapore were also brought in to help tighten controls.
Alleged insider trading
The alleged breaches followed a whistleblower complaint in 2024, following which the bank conducted an internal review and fired some senior officials later that year.
SEBI found that the information related to the transaction was not maintained on a strictly need-to-know basis. Teams involved in broking, research and regional syndication are alleged to have interacted with potential investors ahead of the public announcement of the sale.
Such interactions undermine the integrity of internal ‘Chinese walls’ meant to prevent the flow of sensitive information within financial conglomerates, it said. The deal team appeared to rely on other internal arms to sound out potential investors, which the rules are meant to prevent.
During the investigation, SEBI also faced inconsistent responses from the bank, including initial denials of investor interactions that were later acknowledged, sources said.
Bank of America has applied to settle the matter without admitting or denying the findings, which is under SEBI’s consideration. Emails sent to SEBI and BofA Securities India for comments did not elicit a response.