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Federal judge approves $150 million SEC-Bank of America settlement agreement

[JURIST] A judge in the US District Court for the Southern District of New York [official website] on Monday accepted [opinion, PDF] a $150 million dollar settlement agreement between the Securities and Exchange Commission (SEC) [official website] and Bank of America (BOA) [corporate website]. In his ruling, Judge Jed Rakoff said he was "reluctantly agreeing" to the settlement, which he called "improved, but far from ideal" and "half-baked justice at best." Rakoff further indicated:

If the Court were deciding that question solely on the merits – de novo, as the lawyers say - the Court would reject the settlement as inadequate and misguided. But as both parties never hesitate to remind the Court, the law requires the Court to give substantial deference to the SEC as the regulatory body having primary responsibility for policing the securities markets, especially with respect to matters of transparency. While such deference can never be absolute - since the Judgment ultimately entered is the Court's and is enforced by the Court's contempt power – the Court would fail in its duty if it did not give considerable weight to the SEC's position.

The SEC had charged [JURIST report] BOA with misleading investors regarding billions of dollars paid to Merrill Lynch [corporate website] executives during the acquisition of the firm. Rakoff twice rejected a proposed settlement [JURIST report] between the SEC and BOA for $33 million, which did not admit any fault or directly penalize any corporate executives, calling the settlement unfair to the shareholders. Had an agreement not been reached, a trial was scheduled to begin next week.

The settlement agreement comes less than one month after New York Attorney General Andrew Cuomo [JURIST news archive] filed civil charges [complaint; JURIST report] against BOA, former CEO Ken Lewis, and former CFO Joseph Price, alleging that the bank misled investors in order to acquire Merrill Lynch. The complaint alleges that Merrill Lynch had significant losses in the months leading up to a shareholder vote on the merger and that Lewis and Price violated the New York Martin Act [WLF backgrounder, PDF] because they knew of the losses but failed to disclose them to shareholders before the vote.

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