The U.S. Securities and Exchange Commission (“SEC”) has granted Bank of America Corporation (BAC) a 30-month waiver for selling shares in hedge funds, startups and other private offerings to wealthy and institutional investors. According to the SEC laws, any floundering financial firm is barred from selling a private offering for 60 months. Notably, the same restriction was supposed to be imposed on BofA this week after the bank settled its faulty mortgage-backed securities (“MBS”) sale with the SEC for $136 million.
The bank, however, requested the regulator for a waiver, assuring that it has tightened the process of issuing securities and taken measures to be SEC-compliant. After having a serious look at the case, the SEC granted the waiver to BofA, following its tradition in cases where the accused firm has taken appropriate remedial actions such as tightening internal control and removing employees found guilty.
Notably, per the deal with SEC, BofA will have to hire an independent consultant for broadly reviewing the policies and procedures pertaining to compliance. Further, the bank must extend full cooperation to the independent consultant regarding the review process and abide by the recommendations given.
Notably, BofA will have to request additional relief from the SEC, for any further waiver in the remaining 30 months of the five-year ban.
Though BofA was granted the waiver this time around, things may not turn out in its favor every time. Hence, banks should focus on improving their internal control and compliance before such undesirable issues crop up.
BofA currently carries a Zacks Rank #3 (Hold). Some better-ranked banks include Enterprise Financial Services Corp. (EFSC), Bank of the Ozarks, Inc. (OZRK) and Associated Banc-Corp (ASBC). While Enterprise Financial Services sports a Zacks Rank #1 (Strong Buy), both Bank of the Ozarks and Associated Banc-Corp carry a Zacks Rank #2 (Buy).
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