Bank of America pays record $42 million penalty over fraudulent 'masking'

(Reuters) - Bank of America Corp (BAC.N) will pay a record $42 million penalty to New York state to settle an investigation into fraudulent practices related to its electronic trading division.

New York Attorney General Eric Schneiderman, who announced the settlement on Friday, said Bank of America Merrill Lynch admitted to having systematically misled clients about how their stock orders were handled.

The attorney general said the bank admitted to having over five years concealed how it routed client orders to so-called electronic liquidity providers such as Citadel Securities, D.E. Shaw, Knight Capital, Two Sigma Securities and Madoff Securities.