Monday, June 21, 2010
The Massachusetts Securities Division recently filed an administrative complaint
against Banc of America Investment Services, charging it with misrepresentations in the sale of Fannie Mae/Freddie Mac Bonds. According to the complaint, the investor at the center of the allegations was originally a customer of the Bank of America and had CDs coming up for renewal. In a desperate attempt to save the money from leaving the BofA family, a dual employee of the bank and BAI pitched the federal agency step-up bonds that had more attractive interest rates than CDs, but also came with more risks. In recommending the product, which the dual employee was not authorized to sell, both the dual employee and a registered representative of BAI made gross mischaracterizations as to the safety of the product. The complaint further alleges that through a series of misrepresentations and failures to comply with BAI's supervisory procedures, the employee and registered representative prevented $2 million from leaving the BofA family. The complaint goes on to allege that neither individual was disciplined for this action, but instead were praised for keeping the money in the firm,.