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Bank of America Investment Banking

Bank of America Wants to Attract more Hedge Fund Clients to Its European Investment Banking Unit

The nation's leading financial institution Bank of America wants to attract more hedge fund clients to its European investment-banking unit, including clients that were engaged in the so-called dividend-arbitrage tax trades.
Bank of America Corp. for years used its government-backed U.S. banking subsidiary to finance billions of dollars in controversial trades that helped hedge funds and other clients avoid taxes, according to internal documents and people familiar with the matter.
The bank last year quietly started phasing out the practice of using funds from its U.S. banking unit to finance transactions by its European investment-banking arm that, among other things, helped hedge funds avoid taxes on stock dividends, according to the documents and people. The practice has ended, according to a bank spokesman.
The strategy had attracted criticism from federal regulators about reputational risks as well as the broader need to better protect the U.S. deposit-holding subsidiary from risky activities, according to internal bank documents and people familiar with the matter. And it has prompted a series of complaints by a bank employee to U.S. authorities about the investment bank’s use of U.S. bank funding for tax-minimization trades.
Source: Wall Street Journal

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