(Updated to include the response to the settlement from New York Attorney General Andrew Cuomo.)

WASHINGTON (

TheStreet

) --

Bank of America

(BAC) - Get Report

misled investors about the billions in bonuses that

Merrill Lynch

(MER)

was paying out to executives at the height of the financial crisis, according to charges filed by the

Securities and Exchange Commission

Monday.

The embattled Charlotte, N.C.-based firm has turned around and immediately settled the charges, agreeing to pay a $33 million penalty, without admitting guilt.

The SEC alleged that Bank of America essentially lied in proxy materials sent to shareholders prior to their vote on the shotgun merger last fall.

In that proxy, Bank of America "stated that Merrill had agreed that it would not pay year-end performance bonuses or other discretionary compensation to its executives prior to the closing of the merger without Bank of America's consent," the SEC said in a statement announcing the charges and the settlement.

In reality, however, the agency alleges, Bank of America had already agreed to let Merrill spread "up to" $5.8 billion in bonuses to its executive classes. Before the deal closed in January, Merrill ended up distributing about $3.6 billion even while the combined company faltered and accepted billions in federal aid to stay afloat.

"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," the SEC's director of enforcement, Robert Khuzami, said in the statement.

New York Attorney General Andrew Cuomo, whose office had also been investigating the Merrill bonuses, said in a statement that his investigation will continue, despite BofA's settlement with the feds.

The whole bonus-amid-bailout controversy has, of course, spurred outrage to the point of not only investigation but legislation. On Friday, the House passed a bill that would curtail executive compensation at financial firms accepting federal aid.

In afternoon trading Monday, BofA shares gained 50 cents, or about 3%, to $15.29.

-- Written by Scott Eden in New York.

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