A U.S. District Court Judge signed off on the $150 million settlement between Bank of America Corp. and the Securities and Exchange Commission over allegations of making misleading statements during BofA’s purchase of Merrill Lynch & Co., but he wasn’t exactly happy about doing it.
In August, the SEC had accused the bank of misleading investors, telling them that Merrill had agreed not to pay year-end bonuses, when in fact BofA had agreed to pay almost $6 billion in bonuses. And then in January, the SEC filed another complaint, alleging that the bank failed to disclose Merrill Lynch’s expected losses.
Judge Jed S. Rakoff, who had already rejected an earlier $33 million settlement agreement, was anything but enthusiastic in his approval of the deal, calling it “half-baked justice at best” and “inadequate and misguided.”
But in the end, he deferred to the decision-makers at the SEC.
“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,” Rakoff wrote in his ruling on the matter.
A trial was scheduled for March 1 had Rakoff rejected the accord, as he did an earlier $33 million settlement.
Even though Judge Rakoff, who described the measures in the settlement as “very modest punitive, compensatory, and remedial,” was displeased by the agreement, there was much chest-pounding over at the SEC.
“The settlement calls for the imposition of the largest financial penalty ever assessed for violation of the commission’s proxy rules and imposes corporate reforms designed to avoid future violations,” SEC mouthpiece John Nester said about the decision. “The settlement was based on a thorough and objective assessment of the facts and the law, and sends a strong message.”
However, Rakoff points out in his ruling, that since the $150 million only goes to the legacy shareholders who were actually harmed by the misstatements, this punishment only really hurts the current shareholders and not the Bank’s management who made the allegedly misleading statements.
What do you think? Is $150 million enough? Too much?