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BofA Settles SEC Suit Over Merrill Bonuses for $33M

Commission says bank misled investors over Merrill payout

By Matt Cantor,  Newser Staff

Posted Aug 3, 2009 1:13 PM CDT

(Newser) – Bank of America will pay $33 million to settle a federal lawsuit, filed today, which says the bank misled its investors, Reuters reports. During its takeover of Merrill Lynch, the lawsuit charges, Bank of America told investors Merrill wouldn’t pay bonuses without BoA’s permission before the deal closed. But, the Securities and Exchange Commission holds, BofA had “contractually authorized” Merrill to pay $5.8 billion in bonuses, the Wall Street Journal adds.

Companies must tell investors of activities that could affect the market. “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 by today’s settlement,” said an SEC official.

A security guard monitors the entrance to the Merrill Lynch Financial Center in London, March 6, 2009.
A security guard monitors the entrance to the Merrill Lynch Financial Center in London, March 6, 2009.   (AP Photo)
A Bank of America branch in San Francisco
A Bank of America branch in San Francisco   (AP Photo)
People move past a Bank of America branch in downtown Philadelphia, May 7, 2009.
People move past a Bank of America branch in downtown Philadelphia, May 7, 2009.   (AP Photo)
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COMMENTS
Showing 2 of 2 comments
Newser001
Aug 3, 2009 6:40 AM CDT
Here are a few examples of industry bonuse schemes that make little sense: 1.) In 2008 Goldman Sachs paid $4.8bn in bonuses, representing more than twice its income. 2.) Similarly, Morgan Stanley awarded bonuses of $4.5bn while earning just $1.7bn. 3.) Citigroup and Merrill Lynch paid bonuses of $5.33bn and $3.6bn respectively while seeing losses of more than $27m each. The bonus systems within the securities industries' is deeply flawed. A report, by the office of New York Attorney Andrew Cuomo, said there was "no clear rhyme or reason" for the pay schemes. So, again I ask, how can one justify Top US banks paying out huge bonuses despite gaining taxpayer bail-outs?
DavoMax
Aug 3, 2009 6:33 AM CDT
Can someone explain where the penalty money goes. In the governments back pocket?

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