Bank of America’s (NYSE:BAC) investment banking division, BofA Securities, has been charged a penalty of $24 million by the Financial Industry Regulatory Authority (FINRA). The regulator has accused the unit of manipulating the U.S. Treasury secondary market by engaging in 717 instances of spoofing and other supervisory failures for over six years.
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Spoofing involves creating fake trading activity by placing orders that are not intended to be executed but to trick other traders into trading against legitimate orders. FINRA disclosed that two of the company’s traders manipulated the market using this deceptive practice between October 2014 and February 2021.
Additionally, FINRA found that BofA Securities lacked a robust supervisory system to detect spoofing in Treasuries until November 2015. Even after that, the system was ineffective in identifying manual spoofing by traders, as it was primarily designed to detect spoofing by trading algorithms.
BAC’s Response to the Matter
BofA Securities settled the matter by consenting to FINRA’s findings. However, the company neither admitted nor denied the allegations.
Further, Bank of America revealed that it had proactively addressed supervision concerns over the past years. The bank disclosed that it has implemented a multifaceted approach that includes enhanced surveillance, increased staff, comprehensive training, and updated policies.
Is BAC a Good Buy Now?
The company’s diverse business offerings, improved loan portfolio mix, and strong capital position help instill confidence in the stock. In addition, investors should note that BAC has an attractive dividend yield of 3.04%, which remains much above the financial sector’s average of 2.1%.
Overall, Wall Street analysts are cautiously optimistic about Bank of America stock. It has a Moderate Buy consensus rating based on nine Buys, eight Holds, and one Sell. The average BAC stock price target of $33.76 implies 10.7% upside potential.
