BofA Securities settles DoJ probe on ‘Cash’ market manipulation by ex-staff

Bank of America Securities has reached an agreement with the U.S. Department of Justice (DoJ) to settle an investigation involving two former traders at its U.S. Treasury desk. These traders were found to be involved in schemes to manipulate the “cash” market over a period spanning from November 2014 to about April 2020. During this time, the two employees entered more than a thousand suspected spoof orders, which were placed without the intention of executing them at the time of placement.

In addition to these cash market manipulations, one of the traders also engaged in manipulation of the futures market for U.S. Treasuries by entering spoof orders. To resolve the investigation, the Justice Department confirmed that Bank of America Securities will not face prosecution. As part of the resolution, the bank will disgorge approximately $1.96 million and contribute around $3.6 million to a victim compensation fund that it will establish and administer.

The Justice Department highlighted Bank of America’s timely and voluntary self-disclosure of the misconduct as well as its full and proactive cooperation throughout the investigation as factors contributing to the decision not to prosecute the bank. Back in 2023, the Financial Industry Regulatory Authority (FINRA) had already fined Bank of America $24 million for the same case.

The bank’s stock price saw a 1.4% increase on Thursday and continued to rise by 0.2% in extended trading. Retail sentiment on Stocktwits regarding Bank of America was categorized as ‘bullish’ at the time of writing. Bank of America CEO Brian Moynihan recently confirmed in an interview with Bloomberg TV that he had no immediate plans to leave the company. However, he highlighted the need for the management to prepare a list of potential candidates to lead the company in the future.

In terms of financial performance, Bank of America’s stock has experienced an 18.1% increase so far this year. This growth can be attributed to a favorable regulatory environment for large U.S. banks, as well as a resurgence in investment banking activity. Overall, this settlement with the DoJ marks an important step for Bank of America Securities in addressing past market manipulation issues and moving forward with a renewed focus on compliance and ethical business practices.