In September I posted a piece on the blog discussing Judge Jed Rakoff’s unusual rejection of a proposed settlement between the Securities Exchange Commission ("SEC") and Bank of America surrounding the solicitation of shareholder proxies to purchase Merrill Lynch & Co. The SEC alleged in its original Complaint that Bank of America failed to adequately disclose information relating to Merrill Lynch bonuses to shareholders as part of the acquisition. Well, as promised, my post today is an update designed to bring you up to speed on the SEC v. Bank of America litigation. At the outset, it should be noted that just about one month ago, in January, the SEC amended its Complaint to allege that Bank of America failed to disclose Merrill Lynch & Co.’s expected losses to shareholders.
On Thursday, February 2, 2010, Bank of America agreed to pay a settlement of $150 million to the SEC to dispose of claims that Bank of America misled shareholders in relation to bonuses and losses at Merrill Lynch. Again, this settlement is subject to the approval of United States District Court Judge Jed Rakoff. Recall, that in September 2009 Judge Rakoff rejected a proposed $33 million settlement between Bank of America and the SEC as unfair and unreasonable.
As part of the settlement, Bank of America would have to take a number of steps over the course of the next three (3) years to reinforce corporate governance and internal control measures. In a court filing on Thursday, in seeking Judge Rakoff’s support the SEC noted: “The relief contemplated by the proposed order is fair, reasonable, adequate and in the public interest…” Certainly, Judge Rakoff will have the final word. It will be interesting to see if Judge Rakoff decides to approve this current settlement proposal.