Bank America Corp. found a can of worms when it took a closer look at a processing division of Security Pacific Corp.

The company's top systems man told a group of data processing auditors from bank regulatory agencies last week that Security's New York-based securities processing division was a disaster waiting to happen.

The division, the Sequor Group, provides clearing services, software, and processing for securities dealers, but it had "no audit trails, no documentation, and no [systems] backup," said Martin Stein, the Bank America executive.

While he praised the system's quality, Mr. Stein said, "We had a situation where if a couple of the top people were on the subway together and it crashed, we'd be in trouble."

Eight of Sequor's top 10 executives have left in the past few months. Several departed voluntarily, and they claim that Mr. Stein is exaggerating.

All systems were backed up to varying degrees, said one former executive, who requested anonymity.

The software was constantly being modified to suit customer needs, he added, but keeping up-to-date backup would have required a bigger programming staff.

"Most of the industry operates the way we did," the source insisted.

Bank America sent its own people to New York a few months ago and obtained the so-called source code, the guts of the software that would be critical in the event that the unit's computer systems crash.

"We can live with that, but we won't be entirely happy until it's totally backed up," said Mr. Stein.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.