A federal judge “
Judge Jed S. Rakoff from the U.S. District Court for the Southern District of New York did not think the settlement truly addressed the issues of fairness and public interest, but he said that both sides had reminded him that the law specifies that the SEC be given “substantial deference” as a regulatory body, according to news reports.
Under the current agreement, the SEC asked BofA undertake reforms pertaining to the bank’s disclosure process in addition to the multi-million penalty, according to the SEC’s legal brief filed earlier this month.
Last September, Judge Rakoff rejected a proposed settlement of $33 million, partly on the grounds that it was unfair to the BofA’s shareholders. This time, according to other press reports, he demanded that the settlement be adjusted so that funds would be distributed to the legacy BofA [BAC] shareholders harmed by the non-disclosures and not the Merrill Lynch shareholders. The judge also asked the SEC and the bank to include a provision, which had already been agreed upon, for the SEC to have a say in the hiring of an independence auditor to assess whether the bank’s accounting controls and procedures are adequate.
A bank spokesman said by email that BofA is very pleased that the settlement has been approved. An SEC spokesman could not be reached for comment.
The court action stems from BofA’s $50 billion acquisition of Merrill Lynch at the height of the financial crisis in the fall of 2008 and the failure of management to disclose massive losses at Merrill before shareholders approved the deal. The SEC has maintained that senior management and in-house counsel “erroneously concluded that no disclosure was necessary because the projected quarterly loss was within the range of losses that Merrill had sustained in the preceding five quarters.”
The SEC had not made any charges against individual executives or lawyers involved in the negotiations. But,
According to that lawsuit, Bank of America’s management intentionally failed to disclose massive losses at Merrill before shareholders approved the acquisition. Moreover, once the deal was approved, management then allegedly manipulated the federal government into granting a massive taxpayer bailout, according to the complaint. Cuomo’s suit is still pending.