A federal judge on Monday approved a $150 million settlement between the Securities and Exchange Commission (SEC) and Bank of America Corporation (BAC), or BofA, to conclude the civil allegation on BofA for misleading its shareholders in its purchase of Merrill Lynch & Co. last year.
SEC had claimed that BofA had not appropriately disclosed the payment of up to $5.8 billion in bonuses for Merrill executives and financial losses at Merrill before BofA shareholders approved the deal in Dec 2008.
BofA and the SEC had initially agreed to a $33 million settlement in favor of the SEC in Sep 2009, but the judge rejected that settlement as insufficient.
This time, U.S. District Judge Jed Rakoff said that the settlement amount was insignificant but met his minimum threshold for approval. Under the settlement, BofA is required to strengthen its corporate governance and disclosure practices.
According to the SEC, the $150 million penalty is the largest ever levied by the SEC for a violation of this type. The settlement was based on a thorough and objective assessment of the facts and the law.
BofA’s fourth quarter 2009 loss came in at 60 cents per share, a nickel worse than the Zacks Consensus Estimate of a loss of 55 cents. This compares unfavorably with the loss of 48 cents in the prior-year quarter.
The market turmoil was more harmful to BofA than to its peers. However, the company has concluded its biggest acquisitions. BofA acquired Merrill Lynch almost during the height of the financial crisis last year. It also acquired Countrywide Financial Corporation in July 2008. The CEO views these deals as beneficial for stakeholders of the company. Furthermore, this will allow the bank to focus on rebuilding customer relationships.
Finally, differences of opinion with regulators and lawmakers over Merrill’s 2008 bonus payments issues amid escalating losses will end with this recent $150 million settlement.
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