Hong Kong's securities regulator publicly censured Bank of America Corp. for misconduct while the bank served as a financial adviser on two Asian deals last year.

The regulator, the Securities and Futures Commission, said it has censured units of Bank of America Merrill Lynch for failing to disclose dealings in securities of companies involved in two transactions on which the bank advised in 2015. Bank of America wasn't fined for the conduct and said it would take measures to improve its compliance procedures, according to a statement from the regulator.

A spokesman for Bank of America declined to comment.

Under the takeovers code, parties involved in a buyout offer and their financial advisers must disclose their dealings in the securities of the target company that are conducted for themselves, or on behalf of clients, during an offer period.

Bank of America advised Power Assets Holdings Ltd., a Hong Kong-listed power company owned by tycoon Li Ka-shing, on its proposed US$13 billion merger with Cheung Kong Infrastructure Holdings Ltd., another Hong Kong-listed company owned by Mr. Li, in September 2015. That deal was eventually thwarted by shareholders.

During the offer period for that deal, Bank of America's units dealt in cash-settled equity swaps in CKI and Power Assets shares during the offer period, but failed to file disclosures for some of those swaps.

Cash-settled equity swaps are used as hedging strategies in takeover deals, where an investment is made in the opposite movement of the value of the company being targeted. This prevents losses if the value of the target falls. They are also used as speculation strategies in such deals, aiming to profit from the fluctuations in the price of the target.

Bank of America also advised CRH (Enterprise) Ltd., an offshore entity of China Resources (Holdings) Co. Ltd., on its partial offer for China Resources Beer (Holdings) Co. Ltd. in April 2015. CRH proposed a conditional offer to purchase all the non-beer business segments of China Resource Beer for HK$28 billion (US$3.6 billion) and tapped Bank of America and Morgan Stanley to advise on the cash portion of the offer. Bank of America's units also dealt in cash-settled equity swaps during the offer period for that deal, some of which they failed to disclose.

The Hong Kong regulator said Bank of America Merrill Lynch accepted its disclosure obligations in both transactions and admitted to shortcomings in its disclosure compliance system, which it said it is addressing through a number of measures.

In February, Hong Kong's securities regulator publicly censured an Asian unit of Goldman Sachs Group Inc. for misconduct while serving as a financial adviser to Hong Kong lender Wing Hang Bank Ltd. during its $5 billion buyout by Singapore's Oversea-Chinese Banking Corp.

The Securities and Futures Commission said Goldman's "conduct fell far short of the standards expected" of a financial adviser under the body's codes governing takeovers and mergers. The activities under scrutiny occurred between November 2013 and January 2014.

Write to Alec Macfarlane at Alec.Macfarlane@wsj.com and Kane Wu at Kane.Wu@wsj.com

(END) Dow Jones Newswires

June 30, 2016 03:25 ET (07:25 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
Power Assets (PK) (USOTC:HGKGY)
Historical Stock Chart
From Nov 2024 to Dec 2024 Click Here for more Power Assets (PK) Charts.
Power Assets (PK) (USOTC:HGKGY)
Historical Stock Chart
From Dec 2023 to Dec 2024 Click Here for more Power Assets (PK) Charts.