NEW YORK (
Bank of America
shareholders may actually benefit from a federal judge's decision Monday to reject a settlement with the
Securities and Exchange Commission
Judge Jed Rakoff said the settlement, which would have the bank pay $33 million for its mishandling of the
acquisition, was "neither fair, nor reasonable, nor adequate," according to news reports. The judge had previously assailed the settlement, in which admitted no legal wrongdoing, and forced the parties to explain themselves in several proceedings.
But his finding doesn't mean that he wants the bank -- and thus shareholders -- to pay more. It means that he wants the executives responsible to pay the fine, a tactic that SEC policy directs but was apparently disregarded.
Rakoff has struggled to determine the point-person who made decisions about when or whether to disclose information about the deal to shareholders. BofA has said its executives relied on the counsel of lawyers, who are protected by attorney-client privilege.
Rakoff has repeatedly said that BofA can't have it both ways, and implied that the SEC pulled the settlement amount out of thin air. The $33 million is in line with similar settlements in the past, but represents a pittance in comparison to the $5.8 billion in bonuses to Merrill employees or the $15 billion in fourth-quarter losses that were not disclosed to shareholders until after they had approved the deal.
"It does not comport with the most elementary notions of justice and morality, in that it proposes that the shareholders who were the victims of the bank's alleged misconduct now pay the penalty for that misconduct," the judge wrote.
BofA shares were recently down 1.6% at $16.70.
-- Written by Lauren Tara LaCapra in New York