To settle administrative charges made by the Securities and Exchange Commission, Banc of America Securities LLC has agreed to paying $26 million in penalties and disgorgement. The SEC says that BAS did not safeguard upcoming research reports and submitted ones that were fraudulent to companies. Without denying or admitting the charges, BAS has agreed to a cease-and-desist order against future violations and to being censured, as well as other remedial measures. It will also work with an independent consultant to assess its internal controls and prevent nonpublic information about forthcoming researched from being misused again.
The SEC says that there was a “breakdown” in internal controls that had been put in place at BAS to stop the firm and its employees from misusing research reports that were forthcoming between January 1999 and December 2001. Because of this breakdown, traders and salespersons at BAS allegedly found out about research changes that were forthcoming, such as downgrades and upgrades.
The SEC claims that BAS had no effective or clear procedures and policies that could allow it to control or manage this kind of information. Because of this, BAS allegedly traded prior to the research reports being issued. The firm is also accused of not taking care of specific conflicts of interest, which compromised the integrity and independence of its analysts. These conflict allegedly led to misleading research reports being published and given to TelCom Semiconductor Inc., Intel Corp, and E-Stamp Corp.
SEC Enforcement Director Linda Thomsen says that the Commission is committed to plugging improper information leaks on Wall Street and that the action against BAS made it apparent that firms need to have proper safeguards on nonpublic information. SEC Associate Enforcement Director Antonia Chion said that firm policies “must be implemented and enforced.”
The $26 million will be placed in a Fair Fund account for BAS customers.
In 2004, the SEC had issued BAS a censure and ordered the firm to pay $10 million for taking part in dilatory tactics and failing to produce documents.
Although the SEC has the authority to censure and take action against the different brokerage firms and their employees for inappropriate or illegal actions, the Commission cannot help investors recoup their losses. Shepherd Smith and Edwards represents investors throughout the United States that have been the victims of investor fraud. We have helped thousands of investors recover their losses. Contact Shepherd Smith and Edwards and ask for a free consultation.
Related Web Resources:
SEC Enforcement Action Against Banc of America Securities for Failing to Safeguard Nonpublic Research Information and Publishing Fraudulent Research; Firm to Pay $26 Million, SEC.gov, March 14, 2007
Securities and Exchange Commission
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