Bank of America
is in preliminary talks about settling allegations that several employees traded stocks with advance knowledge of research reports by the bank's analysts, sources say.
The settlement talks are aimed at bringing to a close a
Securities and Exchange Commission
investigation into the bank's brokerage arm that began nearly three years ago. The investigation not only involves allegations of so-called "front-running" analyst research reports, but charges that BofA's securities arm produced biased research reports.
In a regulatory filing Tuesday, the nation's third-largest bank said SEC attorneys have "indicated informally" that the investigation could lead to the filing of an enforcement action "with respect to certain trading and research-related activities'' at the bank from 1999 to 2001. Officials for the bank and the SEC declined to comment further.
The Charlotte, N.C.-based bank was not a party to the $1.4 billion tainted-research settlement that securities regulators agreed to in 2003 with 10 Wall Street firms, including
J.P. Morgan Chase
A year ago, BofA paid a $10 million fine to the SEC for impeding the investigation by failing to promptly turn over documents and email records sought by regulators. The fine was the biggest ever imposed by the SEC for such an infraction.
The bank's tactics stalled the SEC inquiry into allegations that up to seven former senior managers at Banc of America Securities made stock trades in advance of soon-to-be released rating changes by the firm's equity analysts.
first reported the front-running investigation in January 2004.
also has been looking into past research practices at BofA.
In December 2003, the NASD suspended and fined a former BofA telecommunications analyst for issuing misleading research reports that touted stocks he was simultaneously advising hedge funds to sell short.
In February 2004, the NASD notified Mark Lehmann, the bank's former director of equity research, that he could face disciplinary action for failing to supervise an analyst. Lehmann, who left the bank in March 2002, is currently a managing director and director of equities at
Lehmann could not be reached for comment in the still pending NASD action. But on his brokerage registration statement he denied the allegations. He said the potential charges were without merit and that he intended to contest them vigorously.