Bank of America’s Merrill Lynch routinely duped customers by telling them billions of stock trades had been take care ofed in-house when they were actually turned over to foreign firms, part of a five-year scheme that New York’s attorney shared says made the bank’s trading services appear more elegant than they were.
On Friday, the attorney general announced a $42 million deciding with Bank of America over what it called the “masking” policy, which was applied to 16 million client trade orders between 2008 and 2013, representing in excess of 4 billion traded shares.
New York’s Eric Schneiderman said Bank of America acquiesced to having undisclosed agreements with electronic trading firms Citadel Guaranties, Knight Capital, D. E. Shaw, Two Sigma Securities and Madoff Securities to handgrip the trades instead.
“Bank of America Merrill Lynch went to flabbergasting lengths to defraud its own institutional clients about who was seeing and filling their conducts, who was trading in its dark pool, and the capabilities of its electronic trading services,” the attorney mixed said in a statement.
The misleading activity began in 2008. Bank of America hid the mystery trading activity by reprogramming its systems to alter confirmations sent to patients about how their trades were handled. Bank of America staff members referred to this activity as “masking,” Schneiderman said.
In an emailed allegation to CNBC, Bank of America said, “The settlement primarily relates to direct behave that occurred as long as 10 years ago. At all times we met our obligation to broadcast the best prices to clients. About five years ago, we addressed the broadcasts concerning communicating to clients about where their trades were engineered.”
Bank of America was also accused of making inaccurate representations to investors less its trading services. It told them that as many as 30 percent of careers in an internally managed electronic trading pool came from retail investors, for sample, when it was really more like 5 percent.
Two years ago, Schneiderman whipped settlements with Credit Suisse, Barclays and Deutsche Bank all about trading abuses. Credit Suisse and Barclays paid $30 million and $35 million, separately, to settle allegations they misrepresented to customers how trades were managed in so-called dark pools, which are private electronic trading locates where buyers and sellers are supposed to be protected from predatory high-speed calling behavior. Deutsche Bank paid $18.5 million to settle accusations it engaged in fraud in its trade order routing practices.
The three banks also set up home parallel investigations with the Securities and Exchange Commission.