[JURIST] The US Securities and Exchange Commission (SEC) [official website] filed new charges [complaint, PDF] Tuesday against Bank of America (BOA) [corporate website], alleging that the company failure to disclose [press release] to its shareholders "extraordinary losses" at Merrill Lynch [corporate website] prior to the merger of the two companies. The SEC's complaint charges BOA with violating Section 14(a) of the Securities Exchange Act of 1934 and SEC Rule 14a-9 [texts], which require disclosure "necessary or appropriate … for the protection of investors." BOA shareholders voted to approve the proposed merger with Merrill Lynch at a meeting in December 2008. The SEC alleges that BOA learned that Merrill Lynch had incurred billions of dollars in losses for October and November before the vote, but failed to disclose the losses to shareholders. Merrill Lynch's full fourth quarter 2008 losses, totaling more than $15 billion, were announced more than a month later, in January 2009. BOA stock dropped nearly 30 percent the next day, according to the SEC.
The SEC originally sought to add this charge to its previous case against BOA, which charged it with misleading investors [JURIST report] regarding billions of dollars paid to Merrill Lynch executives during the acquisition of the firm. A federal judge 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. The original complaint, filed in August, alleges that during the merger of the companies, BOA allowed Merrill Lynch to pay more than $3.6 billion in bonuses to its executives, despite record losses at that time, and withheld such information from its shareholders.