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BEHIND THE HEADLINES Bank of America’s $24M fine

the manager actually cares about strong compliance program performance. Well, isn’t that a matter of training and incentivizing the manager to care about ethics and compliance? Isn’t it a matter of forging strong bonds with the manager, so that they want the whole organization to succeed — and succeed the right way — as much as the manager wants to succeed personally? So maybe, as much as we need to focus on the challenges of effective internal control, those effective internal controls still need a strong corporate culture to succeed. Funny how that point keeps cropping up. Matt Kelly is editor and CEO of Radical Compliance and formerly ȕļǨхŧşƎǵƺǠхƺƀхƺƮǝƥƎļưŘŧхÙŧŧƢϭ

şƎşхưƺǵхƉļȔŧхļхǨǽǝŧǠȔƎǨƺǠțхǨțǨǵŧƮх ǵƺхşŧǵŧŘǵхǨǝƺƺɭưƁхƎưхºǠŧļǨǽǠƎŧǨх ǽưǵƎƥхtƺȔŧƮŗŧǠхʹͲͳͷϰхǽưǵƎƥхƮƎşЗ ʹͲͳͻϮхǵƉļǵхǨțǨǵŧƮхȕļǨхşŧɭŘƎŧưǵх in that it was designed to detect ǨǝƺƺɭưƁхŗțхǵǠļşƎưƁхļƥƁƺǠƎǵƉƮǨϮхưƺǵх ƮļưǽļƥхǨǝƺƺɭưƁхŗțхƎǵǨхǵǠļşŧǠǨϮхƥƎƢŧх the 717 instances addressed in the settlement. In addition, until at least $ŧŘŧƮŗŧǠхʹͲʹͲϮхƺƀ
х ŧŘǽǠƎǵƎŧǨЩх ǨǽǠȔŧƎƥƥļưŘŧхşƎşхưƺǵхŘļǝǵǽǠŧхƺǠşŧǠǨхƎǵǨх traders entered into certain systems ǝǠƺȔƎşŧşхŗțхŧȚǵŧǠưļƥхȔŧưǽŧǨϭхhļǨǵƥțϮх ƺƀ
х ŧŘǽǠƎǵƎŧǨхşƎşхưƺǵхǨǽǝŧǠȔƎǨŧхƀƺǠх ǝƺǵŧưǵƎļƥхŘǠƺǨǨЗǝǠƺşǽŘǵхǨǝƺƺɭưƁхƎưх Treasuries through September 2022.” BofA Securities settled with FINRA, though it did not admit nor deny the charges, and in a statement ǵƺх¥ŧǽǵŧǠǨхǵƉŧхŗļưƢхǨļƎşхƎǵхȕļǨх ƎƮǝǠƺȔƎưƁхǨǽǠȔŧƎƥƥļưŘŧхļưşхǵǠļƎưƎưƁϭ The junior trader, Tyler Forbes, was accused of placing 194 spoof trades before being fired in 2019, Reuters reported, and he later pleaded guilty to manipulating Treasury prices and was sentenced to two țŧļǠǨхƺƀхǨǽǝŧǠȔƎǨŧşхǠŧƥŧļǨŧϭхºƉŧх ƀƺǠƮŧǠхǨǽǝŧǠȔƎǨƺǠϮх ƎşưŧțхhŧŗŧưǵļƥϮх ȕļǨхļŘŘǽǨŧşхƺƀхǝƥļŘƎưƁхͷʹ͵хǨǝƺƺƀх ǵǠļşŧǨϭхOŧхƥŧƀǵхļưƢхƺƀх
ƮŧǠƎŘļхƎưх 2021 and faces a FINRA disciplinary proceeding.

TưхtƺȔŧƮŗŧǠϮхFTt¥
хļưưƺǽưŘŧşхƎǵх ƉļşхƀƎưŧşхļхǽưƎǵхƺƀхļưƢхƺƀх
ƮŧǠƎŘļх $24 million, alleging that two ƀƺǠƮŧǠхǵǠļşŧǠǨхǨǝŧưǵхțŧļǠǨхǵļƢƎưƁх ļşȔļưǵļƁŧхƺƀхƎưŧƀƀŧŘǵƎȔŧхƎưǵŧǠưļƥх controls systems. The two traders, one a junior trader and the other ļхǨǽǝŧǠȔƎǨƺǠхļǵхļưƢхƺƀх
ƮŧǠƎŘļх Securities, conducted more than 700 spoof trades between 2014 and 2021, FINRA said. ǝƺƺɭưƁхƎǨхļхǵțǝŧхƺƀхƀǠļǽşǽƥŧưǵх ǵǠļşƎưƁхƎưȔƺƥȔƎưƁхǵƉŧхǽǨŧхƺƀхƺǠşŧǠǨхǵƉļǵх ǵƉŧхǵǠļşŧǠхşƺŧǨưЩǵхƎưǵŧưşхǵƺхļŘǵǽļƥƥțх execute, creating a false appearance ƺƀхļŘǵƎȔƎǵțхƺưхƺưŧхǨƎşŧхƺƀхǵƉŧхƮļǠƢŧǵх to induce trades other participants would not otherwise execute. BofA Securities was accused of cascading compliance failures, ƎưŘƥǽşƎưƁхƀƎǠǨǵхưƺǵхƉļȔƎưƁхļưțхǨțǨǵŧƮх for detecting spoofing and then designing a system that was easily gamed by the two former traders, ƺưŧхƺƀхȕƉƺƮхǠŧŘŧƎȔŧşхŘǠƎƮƎưļƥх ǝŧưļƥǵƎŧǨхƀƺǠхƉƎǨхļŘǵƎƺưǨϭхFTt¥
хǨļƎşϯ “From at least October 2014 through September 2022, BofA Securities failed to establish and maintain ļхǨǽǝŧǠȔƎǨƺǠțхǨțǨǵŧƮхǠŧļǨƺưļŗƥțх şŧǨƎƁưŧşхǵƺхşŧǵŧŘǵхǨǝƺƺɭưƁхƎưхÁϭ ϭх ºǠŧļǨǽǠțхƮļǠƢŧǵǨϭхƺƀ
х ŧŘǽǠƎǵƎŧǨх

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18 | March 2024

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