The federal judge who last week rejected the SEC’s proposed $33 million settlement with Bank of America has given the bank and the SEC two weeks to provide detailed information about the facts surrounding the disclosure of bonuses paid to Merrill Lynch employees and the preparation of the proxy statement that was required to include such disclosures to shareholders.
Last week Judge Jed Rakoff said the proposed settlement of the case “would leave uncertain the truth of the very serious allegations made in the Complaint.”
Now it seems he is determined to get to the truth.
The judge called the SEC’s complaint “uninformative” and “bare bones” and said he felt the concurrently submitted complaint and proposed settlement agreement lacked transparency.
In a nearly hour and a half hearing the judge repeatedly pressed both sides as to whether or not Bank of America had misled its shareholders over the approval of $3.8 billion in bonuses handed out to 39,000 Merrill employees. He repeatedly asked each side who was responsible for deciding what to include, and how, in the proxy statement, and specifically requested the names of the decision-makers. Hey asked when key players – including Ken Lewis and John Thain – were made aware of or approved the bonus payments.
It is the type of information – the who, what, when and why – the judge expects to see when the bank and the SEC deliver their briefing to the court on August 24. In addition to providing the judge with a full-recitation of the facts of the case (with the SEC’s version of facts to come from their investigation), the parties must submit briefing on the legal issue of whether this case involves the public interest and the court’s role in determining the fairness of the fine. The parties must also tell the court whether they believe a full evidentiary hearing is necessary or whether the judge can make his determination based on the written briefs.
The judge also inquired as to why executives, if there was wrongdoing, should not be held personally liable. The SEC said it was not making those kind of allegations, prompting the judge to note that it was a human, somewhere, who made the disclosure decisions.
Though in the proposed settlement Bank of America would neither admit nor deny fault, their attorney told the judge today their position, should they be forced to litigate, would be that they complied with all relevant SEC laws and properly disclosed all material facts to their shareholders.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.