NEW YORK ( TheStreet) -- Judge Jed Rakoff seems to have become the arbiter of common sense in the Merrill Lynch bonus scandal, filling a regulatory void and helping to mollify shareholder rage.

Judge Rakoff also represents a thorn in the side of Bank of America ( BAC - Get Report) and its regulators.

At issue are $5.8 billion in bonuses that Merrill distributed at year-end ahead of the merger. Merrill's financial condition was deteriorating, eventually resulting in a $15 billion fourth-quarter loss and requiring BofA to take on another $20 billion loan from the government.

BofA management and an assortment of regulators -- including former Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke -- apparently knew about the rewards and the losses, or at least were able to learn of them since they had access to relevant documents.

Shareholders did not.

Typically, a company would not have to report information on such a minute level, especially regarding actions taken before a merger was sealed. However, companies must disclose any information that is "material" -- anything shareholders would need to know in deciding whether to approve the merger. One could argue that the bonuses -- and the losses - were that important, considering that once shareholders knew more about the Merrill deal, they stripped BofA CEO Ken Lewis of his chairmanship.

The SEC, in an attempt to restore its own credibility, slapped Bank of America with a $33 million settlement for the way the disclosures were handled. No one has admitted to doing anything wrong.

All Judge Rakoff really has to decide is whether the settlement is fair. He has gone beyond that scope in an attempt to find out, among other things: Who, specifically, approved the bonuses? He has also shamed the bank and the SEC by asking such simple questions and watching the two parties dance around the answers in a public display of hot potato.

"I think it's important," says Jonathan Finger, a high-profile investor who has helped lead an effort to oust Lewis. "The judge has correctly noted that there were individuals that were behind the actions of the company in terms of its disclosure."

Bank of America argues that investors should have figured Merrill was going to hand out bonuses because that's typically what happens, and Bank of America never said it wouldn't happen. The SEC says it wasn't really the fault of Bank of America, but its lawyers. Those lawyers can't be questioned because BofA would invoke attorney-client privilege.

And what about Paulson and Bernanke? They certainly had bigger fish to fry, but it's worth asking why they didn't make an issue of the bonuses while advising Bank of America to go forth with the deal and accept $20 billion more in taxpayer support to cover Merrill's losses.

About 29% of that sum went into the pockets of Merrill executives, who may have left by now, given the upheaval in employee ranks. One hopes they were not retention bonuses.

Ultimately, there are many issues in question besides whether the $33 million fine -- what many observers characterize as a slap on the wrist -- is fair. One is whether the bonuses represented material information, and, if so, who is responsible for keeping it under wraps.

Perhaps the least fair part of the proposed SEC settlement is that the victims it seeks to redress, BofA shareholders, would end up paying the fine. Judge Rakoff noted this in his invective, indicating that the individual responsible for approving and cloaking the bonuses should bear the cost - whether Lewis, former Merrill CEO John Thain, BofA dealmaking champion Greg Curl, BofA lawyers or bank regulators.

"If you look at Bank of America, really the same senior managers are still there - Ken Lewis, Greg Curl, Steele Alphin, Brian Moynihan," says Finger, whose Finger Investments firm still holds 1.1 million BofA shares. "No one has been held accountable for withholding the disclosures."

Moynihan is viewed by some as the most likely successor to Ken Lewis and was recently promoted to head of the consumer bank. Lewis identified Moynihan and several others, including Citigroup ( C) veteran Sallie Krawcheck as those who will "compete to succeed me at the appropriate time."

Finger says publicity related to the Rakoff ruling may accelerate that succession and believes Lewis will be out within the next six months.

Changes at the board and executive level were largely the result of a mandated management review. JPMorgan Chase ( JPM) analysts note the new leadership represents "a further shift from historical Nations Bank organizational style" that eventually created today's Bank of America -- the biggest bank in the country, with all the problems that entails.

But despite all the negative attention lavished on BofA, Rochdale Securities analyst Richard Bove says it's hard to argue that buying Merrill was a bad idea.

When the firm disclosed Merrill's losses on Dec. 29, its share price was $12.94. Of course it eventually dipped to $3 in March amid a widespread bank-stock sell-off, but eventually recovered markedly. It breached the $18 mark in the past couple of days.

The valuation has almost certainly improved thanks to Merrill's enormous profit contributions in the first two quarters. For instance, in the pre-Merrill quarter, BofA lost nearly $3 billion from investment banking and global markets combined. Last quarter, with Merrill, it earned $3.9 billion.

"Thus, one cannot argue that shareholders have been harmed by the bank's decision that this was not a material reason to put off the merger," Bove said in a recent note.

Bank of America and its regulators may never admit wrongdoing, if only to avoid opening the floodgates for more litigation. But someone certainly did something wrong. Judge Rakoff may be stepping outside his purview with his line of questioning, but at least someone is demanding answers.

Hopefully, the wrongdoer rather than shareholders will be $33 million less wealthy.