India’s market regulator has accused Bank of America of improperly sharing material nonpublic information related to a major block trade in 2024 and of misleading investigators during a subsequent probe, reported Wall Street Journal, citing people familiar with the matter.

The allegations stem from a yearlong investigation by the Securities and Exchange Board of India (SEBI) into a $180 million share sale involving Aditya Birla Sun Life Asset Management Co.

SEBI issued a “show-cause notice” to the Wall Street firm in November, outlining the alleged violations and seeking the bank’s response.

Bank of America is preparing its reply and is expected to seek a financial settlement, potentially running into millions of dollars, without admitting or denying wrongdoing, the report said.

Allegations around information sharing

According to the people familiar with the investigation, SEBI alleges that Bank of America’s deal team shared price-sensitive information internally with employees who were not directly involved in the transaction.

Such information included details about the timing and pricing of the block trade, which regulators classify as material nonpublic information.

The regulator’s notice also alleges that bank employees communicated with certain investors ahead of the transaction.

The Wall Street Journal reported in 2024 that some Bank of America staff had contacted clients before the deal was publicly announced to discuss its terms.

Regulators view such conduct as problematic because it can allow investors to “front-run” trades, positioning themselves to profit from anticipated price movements once the transaction becomes public.

Company records reviewed during the investigation indicated that bankers reached out to investors via WhatsApp, including HDFC Life, Jane Street, and Norges Bank.

Some of those investors told regulators that they had spoken with bank staff before the shares were sold to the market, according to the report.

Claims of misleading regulators

SEBI has also accused Bank of America of providing incomplete or false information when regulators initially inquired about the alleged leak of confidential details.

The bank first told authorities that its processes around the block trade were routine and compliant with market rules, the people said.

However, after conducting its own internal investigation, Bank of America later corrected its statements to SEBI.

The bank turned over additional records showing that individuals outside the core deal team had communicated with investors about the transaction.

The regulator’s notice further alleges that the firm failed to maintain adequate internal controls to prevent the leakage of confidential information related to capital-markets transactions.

Fallout and broader context

Block trades involve the sale of large stakes in listed companies, typically facilitated by banks that briefly take the shares onto their books before distributing them to investors.

While banks are allowed to gauge investor interest ahead of such trades, disclosure rules are strict because large sales can move stock prices.

Sharing nonpublic information ahead of announcements is illegal in India, the United States, and many other jurisdictions.

SEBI has previously sought detailed explanations from banks involved in the Aditya Birla Sun Life AMC transaction.

The probe has already had consequences for Bank of America’s India operations.

Several senior bankers have left the firm since 2024, including a former head of investment banking for India.

The bank has since been working to rebuild its local deal team and last year received regulatory approval to appoint Vikram Sahu as its chief executive officer for India.

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