Posted On: February 15, 2010

Bank of America To Settle SEC Charges Regarding Merrill Lynch Acquisition Proxy-Related Disclosures for $150 Million

Bank of America Corp. (BAC) has agreed to pay $150 million, in addition to $1 million in disgorgement, to settle the Securities and Exchange Commission’s charges over the investment bank’s proxy-related disclosures regarding the Merrill Lynch acquisition. U.S. District Judge Jed S. Rakoff said he hopes to decide by February 19 on whether to approve the settlement. He also said he has more questions regarding the deal.

If approved, the settlement would conclude two SEC securities lawsuits against Bank of America over the Merrill Lynch merger. One complaint involves the investment bank’s alleged failure to reveal, prior to a 2008 shareholder meeting to vote on the acquisition, that financial losses were in the billions and rising at Merrill. The second lawsuit is over what the bank did and did not disclose about the billions of dollars in bonuses paid to Merrill Lynch employees right before the $50 billion merger was completed.

Under the proposed SEC settlement, the $150 million would go to Bank of America shareholders who suffered financial losses because of the investment bank’s alleged disclosure violations. Also, for three years BofA would have to maintain and implement a number of remedial measures, including hiring an independent auditor to look at its internal disclosure controls, hiring a disclosure counsel to work on bank disclosures, making sure that BofA’s chief financial officers and chief executive certify yearly and merger proxy statements, and allowing shareholders to have an advisory say-on-pay vote regarding executive compensation.

Earlier this month, New York Attorney General Andrew Cuomo filed a separate securities fraud lawsuit against Kenneth D. Lewis, who formerly served as BofA’s chief executive, Joe Price, the bank’s former chief financial officer, and Bank of America for allegedly concealing Merrill Lynch's losses. The complaint alleges that BofA general counsel Timothy Mayopoulos was let go because he wanted to disclose the losses at Merrill Lynch before the deal was finalized.

Related Web Resources:
Bank of America Still Dealing With Fallout From Merrill Deal, Fox Business, February 5, 2010

Cuomo Sues Bank of America, Even as It Settles With S.E.C., NY Times, February 4, 2010

US judge has questions on $150 mln SEC-BofA accord, Reuters, February 16, 2010

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