Bank of America Corp (NYSE:BAC)’S Breakup Plan Rests In The Hands Of Shareholders

As the Bank of America Corp (NYSE:BAC) plans breakup of the bank, the Securities and Exchange Commission paved way for the shareholders to vote and decide for the same. SEC has permitted the shareholders of the gigantic bank to vote in favour or against the planned and desired breakup. For this purpose, the SEC said, the bank will now have to attach the shareholder proposal in the proxy statement. Voting shall be done at the 2015 annual meeting of the Bank of America.

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The Proposed Plan for the Shareholders

A proposal is prepared by Bartlett Naylor of Public Citizen (a consumer-advocacy group). This proposal asks the independent directors of BAC’s committee to create a plan so as to separate all the non-core banking segments of this business. Even though BAC opined that the proposal by Bartlett Naylor was highly unclear, the SEC still rejected Bank’s contention; ordering it to include the proposal in proxy.

The Breakup Idea by Public Citizen

In the proposal submitted by Bartlett Naylor to Bank of America Corp (NYSE:BAC), it is suggested that the Bank be split into more than two companies, so that the consumer lending and basic banking businesses can be segregated from investment-banking processes. This, Mr. Naylor suggests, will helps in bringing down the risk of fiscal condensation that hampers and hinders smooth functioning for taxpayers, shareholders and depositors.

An Analysis

It is most likely that the shareholders of Bank will not give majority vote to the proposed plan because the management of Bank of America has already shown its opposition to it. However, the action taken by SEC plays a major role here. Also, SEC’s decision to allow the shareholder proposal in moving ahead is highly significant because of being one-of-its-kind. Contrarily, SEC itself allowed the BAC to eliminate such a kind of a proposal from the proxy statement in 2014.

This act by SEC will pave way for the shareholders of other giant banks to explore BAC breakup, while also giving path to the debate over the matter from investment perspective.

About the Author

Adam is a staff reporter for US Markets Daily Publications & Media, covering foreign affairs and domestic policy.

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