Sebi Alleges Bank Of America Of Leaking Price-Sensitive Information In $180 Million Block Deal

The Securities and Exchange Board of India (Sebi) has alleged that Bank of America (BofA) improperly shared unpublished price-sensitive information (UPSI) and misled investigators in a 2024 block deal of Aditya Birla Sun Life Asset Management Company (ABSL AMC) shares worth about $180 million.

In a show-cause notice sent to the bank, Sebi alleged that BofA’s deal team breached insider trading rules by sharing confidential details of the transaction with employees and teams that were not part of the deal, thereby breaking internal “Chinese walls”, according to a report by The Wall Street Journal. Sebi has also accused the bank of providing false or incomplete information during the course of its investigation.

The case relates to a March 2024 sale of shares in ABSL AMC, where BofA acted as a broker. According to a report by Reuters, Sebi’s investigation found that while holding UPSI about the transaction, the bank’s deal team contacted potential investors “directly or indirectly” before the formal announcement of the share sale.

Sebi alleged that at the request of the deal team, BofA’s broking arm, research team and the Asia-Pacific syndicate team reached out to investors and shared valuation reports and other confidential information. “The conduct highlights the failure of the deal team to maintain Chinese walls with broking and research arms, impacting safekeeping of confidential information and internal controls,” Sebi said a notice dated October 30, according to Reuters.

According to the notice, Sebi flagged interactions with at least three investors, including HDFC Life Insurance, Norges Bank, and Enam Holdings. In one instance cited by Sebi, the deal team asked the broking arm to share a valuation report on ABSL AMC and the Aditya Birla Group with Enam Holdings, a potential investor. In another, the Asia-Pacific syndicate team in Hong Kong, though not formally part of the deal team, was asked to seek feedback from Norges Bank on its interest in the offering.

Sebi said these interactions took place after BofA was appointed to manage the transaction on February 28, 2024, and before the official announcement on March 18, which it termed a violation of insider trading norms. Sebi said the episode exposed serious lapses in internal controls and the handling of confidential data.

Sebi also alleged that BofA initially maintained that its processes were in order, but later revised its submissions after an internal review and shared records showing interactions between investors and employees who were not part of the deal team, according to The Wall Street Journal report.

The issue first came to light in 2024 after a whistleblower complaint alleged that merchant bankers at BofA had shared material non-public information with clients ahead of certain block deals. The allegations led the bank to launch an internal investigation and saw several senior dealmakers exit its India operations last year.

Reuters said in a report that BofA has filed an application with Sebi to settle the charges without admitting guilt, and the application is currently under review.

Sebi regulations prohibit the sharing of price-sensitive information without a legitimate purpose and require such information to be handled strictly on a “need-to-know” basis. Sharing non-public information ahead of a transaction can give a few investors an unfair advantage by allowing them to profit from expected price movements. Sharing of such information is considered illegal in India as well as in several other markets globally.

BofA has been present in India since 1964 and provides investment banking services to large corporates, financial institutions and government entities.