SEC Files Additional Charges Against Bank of America (NYSE: BAC) In Merrill Lynch Merger
The Securities and Exchange Commission (SEC) announced Monday that it is expanding charges against Bank of America (NYSE: BAC) for the lack of financial disclosures to shareholders when seeking approval of Merrill Lynch merger.
The commission wants to charge the bank for failing to disclose extraordinary financial losses at Merrill Lynch prior to the shareholder vote to approve the merger of the two firms.
The SEC has asked the U.S. District Court for the Southern District of New York for permission to amend its pending complaint against Bank of America to include the new charges.
Bank of America is already scheduled to for court with the SEC on March 1 for accusations that it did not disclose bonus payments for Merrill employees to shareholders until after the merger was completed.
The SEC’s proposed amended complaint states that Bank of America knew prior to the shareholder vote on December 5, 2008 that Merrill Lynch experienced a net loss of $4.5 billion in October and had estimated losses in the billions of dollars in November as well. The SEC said between the actual and estimates losses, roughly one-third of the value of the deal was eaten up.
The amended SEC complaint alleges that Merrill Lynch’s substantial losses represented a fundamental change to the financial information Bank of America provided on its November 3, 2008 proxy statement, which solicited votes for merger approval. The commission also points out that Bank of America publicly filed a registration that it would update shareholders on fundamental changes to the information already provided.
The pending court date and the just filed amended complaint follow a $33 million settlement the SEC had previously reached with Bank of America in regard to Merrill bonus disclosures. However, that deal was thrown out by U.S. Judge Jed Rakoff who said the settlement unfairly penalized the banks shareholders.
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