BofA Whistleblower Complaint Puts India’s Block Trade Practices Under Scrutiny

A whistleblower complaint at Bank of America (BofA) has raised concerns about how block trades are handled in India, especially as such deals hit record highs in the country. The complaint alleges that two executives in BofA’s India equity markets team leaked confidential information to investors before certain block trades.

Following this, BofA placed the executives on leave and launched an internal investigation. Block trades in India have surged, with nearly $15 billion worth of deals in the first half of 2024, a 150% increase compared to the same period in 2023.

Block trades are tricky because investment bankers must gauge investor interest without revealing sensitive information. These trades often happen after market hours and close the next morning at a small discount. Merchant bankers typically have informal discussions with investors without revealing key details like the company name, price, or timing of the trade.

While it’s not illegal for bankers to approach investors early, they must be careful not to breach insider trading rules. Some banks conduct “non-deal roadshows” to test investor interest in certain companies or sectors, but they must avoid disclosing price-sensitive details.

In light of this case, India’s Securities and Exchange Board (SEBI) is updating merchant banking regulations, which were initially set in 1992, to address the complexities of today’s market.