BAC Bank of America Corporation

   (FROM THE WALL STREET JOURNAL 11/28/15) 
   By Jenny Strasburg 

LONDON -- A senior manager who helped oversee controversial tax-focused trading strategies in Bank of America Corp.'s equities division is leaving the bank.

Monuhar Ullah, who joined Bank of America in 2008 from Barclays PLC, was the most senior London-based executive of the group that until recently was called Structured Equity Finance and Trading. That unit has generated hundreds of millions of dollars in revenue for the U.S. lender arranging specialized trades that helped clients reduce withholding taxes on stock dividends, according to internal documents reviewed by The Wall Street Journal.

SEFT was dismantled in a recent reorganization of the equities division, according to people familiar with the bank. Besides doing tax-focused trades -- a large chunk of its business -- SEFT helped clients including other large banks and corporations obtain margin loans and finance their stockholdings using derivatives, according to the people and documents.

Following the restructuring that resulted in SEFT's breakup, Mr. Ullah recently had fewer than a dozen employees reporting to him, according to a person familiar with the matter.

Mr. Ullah, a managing director, advised on tax-related aspects of a range of stock-trading and investment strategies, according to internal documents and people familiar with the business. His departure is tied to further restructuring moves that haven't yet been announced, one of the people said.

Mr. Ullah declined to comment when reached on his mobile phoneon Friday. A Bank of America spokesman confirmed his departure.

The restructuring of SEFT has followed upheaval in businesses at the core of the unit and broader changes to the bank's markets business globally.

So-called dividend-arbitrage tax strategies such as those implemented by SEFT have come under pressure from U.S. and European regulators, some of whom are concerned about whether the trades have improperly helped banks and their clients avoid dividend taxes.

Authorities in Denmark, Germany and the U.K. have been investigating whether numerous banks, hedge funds, brokerage firms and other market participants inflated tax-related claims tied to stock dividends in ways that improperly generated tax rebates or credits, according to people familiar with investigations under way and comments made publicly by prosecutors in Denmark and Germany.

One focus of their attention has been a now-defunct subset of dividend-tax trades that went by the moniker "cum/ex," referencing terms describing shares' status before and after dividend payments. Those trades were carefully timed to take advantage of market-structure quirks affecting how trading and tax-withholding systems assigned ownership to shares before and after dividend dates.

As the Journal previously reported, Bank of America has been scrutinizing cum/ex trades it facilitated in past years tied to certain markets, including Germany.

The cum/ex variety of German dividend trades became largely obsolete in 2011 amid scrutiny by tax authorities and stricter enforcement of derivative-trading rules, according to lawyers, traders and brokers familiar with the strategies.

Bank of America hasn't commented on the various tax probes. Mr. Ullah advised on trades by Bank of America that are among those under scrutiny by tax authorities and regulators, according to people familiar with the matter. There's no indication his departure is connected to any investigation.

London has been the center of dividend-arbitrage activity for most of the past decade, according to market participants and documents detailing fund strategies and specific trades.

Most dividend-arbitrage trades aren't illegal, but they stoke debate among bank lawyers, executives and regulators about the reputational risks tied to any transactions designed to minimize taxes.

Bank of America, like other banks, has continued to do dividend-tax trades, though the bank has been questioned by U.S. regulators concerned about its management of reputational risks, The Journal has reported.

The tax trading strategies broadly have become less prevalent and less profitable in recent years, market participants say.

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(END) Dow Jones Newswires

November 28, 2015 02:47 ET (07:47 GMT)

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