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
