Bank of America allegedly misled investors over bonus payments in the takeover of Merrill
Bank of America has agreed to pay a fine of $33m to settle charges with the Securities and Exchange Commission (SEC) that is gave misleading statements to investors about bonuses when it took over Merrill Lynch.
The SEC claimed that Bank of America told shareholders it would not pay year-end performance bonuses to Merrill executives when soliciting their consent for the merger.
In fact, Bank of America had already contractually authorized Merrill to pay up to $5.8bn in bonuses to Merrill executives for 2008, said the regulator. The bonus payments amounted to nearly 12% of the $50bn merger package.
The SEC complained that the statements were misleading.
“As Merrill was on the brink of bankruptcy and posting record losses, Bank of America agreed to allow Merrill to pay its executives billions of dollars in bonuses.
David Rosenfeld, associate director, SEC
‘Companies must give shareholders all material information about corporate transactions they are asked to approve,’ said Robert Khuzami, director of the SEC's Division of Enforcement. Failing to disclose that a struggling company will pay out billions of dollars in performance bonuses obviously violates that duty and warrants the significant financial penalty imposed.’
‘As Merrill was on the brink of bankruptcy and posting record losses, Bank of America agreed to allow Merrill to pay its executives billions of dollars in bonuses. Shareholders were not told about this agreement at the time they voted on the merger,’ added David Rosenfeld, associate director of the SEC's New York Regional Office.
Bank of America settled the SEC's charges without admitting or denying the allegations. The settlement is subject to court approval.
