Source: emii.com
The proposed settlement over Merrill Lynch & Co. bonuses by Bank of America Corp. and the U.S. Securities and Exchange Commission was rejected Monday by a federal judge, who noted it was “absurd” to accept the SEC argument that a fine would help shareholders “better assess the quality and performance of management” after they were “lied to blatantly” over the purchase of Merrill, Reuters reports.
U.S. District Judge Jed Rakoff’s decision comes as the largest U.S. bank faces a Monday deadline to offer more information about the merger to New York Attorney General Andrew Cuomo, or risk its executives facing possible fraud charges. He also told Bank of America and the SEC to prepare for a trial by Feb. 1.
The bank agreed last month to pay $33 million to settle SEC charges it misled investors about authorizing payment of up to $5.8 billion of bonuses to Merrill employees, even though that company lost $27.6 billion. Bank of America did not admit wrongdoing. The bonuses ultimately reached $3.6 billion. Judge Rakoff also questioned why the bank would agree to a settlement if it had done nothing wrong.
Bank of America, the SEC and Cuomo’s office were not available for comment when queried by Reuters.
The decision came before U.S. President Barack Obama’s speech to address regulatory reform, about one year since the Lehman Brothers collapse. Obama urged financial firms not to fight regulatory reform and urged Congress to pass his proposals by year’s end.
Obama said that banks have repaid more than $70 billion and taxpayers have earned a 17% return on their investment where the government’s stakes have been sold entirely. Speaking about “loopholes” to that contributed to the crisis, Obama touched on the FDIC process that has protected depositors and maintains confidence in the banking system, but noted that “we don’t have any kind of process in place to contain the failure of a Lehman Brothers or AIG or any of the largest and most interconnected financial firms in our country.”
He outlined a plan to reform regulation, including “new rules to protect consumers and a new Consumer Financial Protection Agency to enforce those rules.” During his speech, he also said the proposals include plans to “close loopholes that were at the heart of the crisis.” He expounded, adding that regulators did not have the authority to take action and “under existing rules, some companies can actually shop for the regulator of their choice—and others, like hedge funds, can operate outside of the regulatory system altogether.” Finally, he pledged to “close the gaps that exist not just within this country but among countries.”
Financial reform will be a major issue at a G20 summit in Pittsburgh next week.
For the complete story, click here.
For additional coverage, click here.
For President Obama’s full speech, click here.
Latest Banks and Capital Market News from EMII:
HSBC Names U.S. Trade, Supply Chain Head
Steven Lotito has been appointed by HSBC as head of sales, trade and supply chain for the U.S.
Citigroup is looking to lower the government’s 34% stake in the bank.
Wells Fargo Fires Exec Over Malibu Home
Wells Fargo dismisses Cheronda Guyton, vice president and head of commercial owned real estate, on accusations of improperly using a bank-owned home in Malibu.
