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May 20, 2020  

BofA Fine Tied to Prime-Brokerage Head

It turns out the Bank of America executive at the center of Finra’s censure of the bank heads the entire prime-brokerage division.

Martina Slowey worked without the requisite Finra license at the bank’s Merrill Lynch brokerage unit for about four years, sources said. Finra fined BofA $150,000 for violating three agency rules that require registration for executives in roles that directly involve the business of buying and selling securities.

Finra didn’t name Slowey in its May 13 settlement with the bank, but the agency described an individual with “overall managerial decision-making authority” over the prime-brokerage unit. That same individual, Finra said, hired, set compensation for and oversaw the work of some two dozen prime-brokerage employees registered with the regulator. Sources identified the executive as Slowey. BofA declined to comment.

Rival prime brokers and other industry participants were perplexed as to how and why Slowey slipped under the radar for so long. The settlement was a “slap on the wrist” for BofA, one said. Registering senior prime-brokerage employees such as Slowey with Finra ought to be a routine process for the bank, another said.

“Usually, compliance does registration ASAP,” one source said. “Like, someone would catch it before it became an issue.”

One investor said the unit’s failure to meet a routine requirement raised larger due-diligence questions in the eyes of both the allocators and the hedge funds that such capital-introduction teams work to bridge.

The Finra registration includes a background check designed in part to vet bank employees for potential conflicts of interest. It also requires the applicant to sit for at least one exam.

Allegations that something was amiss with Slowey were first raised in a 2018 lawsuit filed against the bank by former prime-brokerage employee Omeed Malik, who had been accused of inappropriate conduct with a female employee. Malik, who reported to Slowey, settled a wrongful-termination case against BofA later that year. In the lawsuit, Malik alleged he was dismissed after he complained to bank executives that Slowey lacked the Finra license required to occupy her post.

The regulator’s investigation determined that the prime-brokerage executive operated as a Merrill principal — a designation that mandates Finra registration — from April 2016 through this year. After joining BofA’s London office in 2013 from Edoma Partners, Slowey headed up the bank’s prime-brokerage activities in Europe, Africa and the Middle East. Slowey, who had also previously spent time in senior roles within UBS’ prime-brokerage division, was promoted to head the department in 2014.

The length of the lapse in her licensing is especially puzzling to industry participants. One capital-raising professional said that Finra has stepped up its policing of such regulatory requirements in recent years.

BofA didn’t admit or deny Finra’s findings as a condition of the settlement, which compels the bank to certify to the agency by mid-June that the executive is either “not actively engaged in management of the firm’s securities business” or has become registered. Slowey had yet to register with Finra earlier this week, according to the regulator’s BrokerCheck service.

CORRECTION (5/20/20): This article has been revised. The original version incorrectly characterized allegations against former Bank of America executive Omeed Malik. He was accused him of inappropriate conduct with a female employee, not sexual harassment.