Financial investment company Bank of America (BofA) was fined $5 million for failing to disclose details involving about 7.42 million different cases of over-the-counter options positions, Reuters reported on Monday.
Over-the-counter (OTC) options refer to the trading of financial derivatives between a buyer and a seller. With this feature, an investor has the ability to long or short a position.
FINRA Fines BofA $5M
The Financial Industry Regulatory Authority (FINRA), an American regulatory agency that oversees about 3400 financial institutions, mandates all firms under its jurisdiction to report to its “Large Options Positions Reporting” platform. This entails that companies that hold more than 200 contracts in either long or short positions need to fulfill the mandate set in place.
After alleging that the Bank of America did not make adequate provisions to accommodate the requirement from 2014 to 2020, FINRA fined the American investment company $5 million. The regulator added that such acts make it “harder to monitor markets for possible manipulative behavior.”
“BofA Securities’ failures occurred from 2009 to October 2020, and included 26 options positions that exceeded applicable size limits by 20% to 2,900%,” the statement added.
When commenting on the cause of the failure to disclose the required information, the BofA mentioned that the fault sprung from an “undetected system issue in the reporting process.”
According to the report, the multinational investment bank did not “admit or deny wrongdoing in agreeing to settle.” The bank has also rectified the faults raised that led to the charges, where it stated that it has added “data quality checks” to its system to ensure adherence to FINRA’s mandate.
Blockchain – A Better Option?
Among the various use cases of blockchain, the technology was designed to solve several problems with real-world financial institutions. One of the notable features of the blockchain is its transparency, which allows all parties to access transaction history on the network.
Financial institutions can adopt blockchain technology to improve transparency, thus making it easier for auditors to review records. Interestingly, some banks such as JP Morgan, Goldman Sachs, and BNP Paribas are already leading the way in this direction.
In April 2021, JP Morgan announced adopted blockchain for international money transfers to improve transparency, speed, and cost.
Goldman Sachs has also adopted blockchain-based platforms to facilitate trades of bonds and other securities.
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