SEC and Bank of America fail to get approval for settlement from US judge
A US federal judge has refused to approve Monday’s settlement between the US Securities and Exchange Commission (SEC) and Bank of America (BoA) related to the acquisition of Merrill Lynch.
Judge Jed Rakoff of the federal district court in Manhattan said it may be unfair to the public to accept the settlement, which would resolve SEC allegations that BoA made false and misleading statements to shareholders about bonuses promised to Merrill employees.
Bank of America had agreed to pay $33m (£20m) to settle the civil lawsuit and, along with the SEC, had sought the judge’s approval for the settlement. Rakoff has set a hearing for the afternoon of 10 August.
In its complaint, the SEC had alleged that BoA told investors in proxy documents for the Merrill merger that Merrill had agreed it would not award year-end performance bonuses or incentive pay before the merger closed.
In fact, the SEC alleged that BoA had already authorised Merrill to pay up to $5.8bn in bonuses. Merrill would ultimately pay $3.6bn, according to regulators.
The merger closed on 1 Jan 2009 and two weeks later BoA was forced to accept $20bn from the federal Troubled Asset Relief Program to help it absorb Merrill.
The SEC last night declined to comment on the situation.