A Bank of America sign stands on the side of a building in New York U.S., July 16, 2018. REUTERS/Lucas Jackson

(Reuters) - Bank of America BAC.N is placing trading restrictions on penny stocks as part of a policy change aimed at shielding clients from risky assets, the Wall Street bank said on Friday.

“To ensure we are complying with Securities and Exchange Commission (SEC) regulations and protecting the interests of our clients, we have made changes to our policy regarding low-priced security,” Bank of America spokesman Jerry Dubrowski said.

The bank considers low-priced securities as those that trade over-the-counter at, or below, $5 per share, and have limited or no financial disclosure information available.

Bank of America had begun clamping down on its clients’ dealings in penny stocks in late July by banning purchases, CNBC reported earlier on Friday.

Six weeks later, the bank told clients it was restricting sales of risky securities, later amending the policy to give customers time to exit their positions, the report said.

Bank of America is the first among big financial firms to pull back on the purchase of penny stocks, although companies including UBS UBSG.S and Morgan Stanley MS.N have review processes in place to evaluate risky trades, people with knowledge of those firms' policies told CNBC.

Over-the-counter securities have suffered a fall in reputation after being used for decades as tools for fraudulent schemes, thanks to lack of disclosure requirements.

Brokerages and traders looking to make quick money off this segment of the market buy stock in dormant shell companies, spread false information to promote the companies’ products, and then dump the shares as other investors start buying in at inflated prices.

U.S. SEC Chairman Jay Clayton has expressed shock at the amount of fraud related to penny stocks in his first year leading the agency. He has also said the regulator would increase scrutiny of trading in penny stocks.