News

Bank Of America Agrees to Pay $150 Million to Settle SEC Charges

News Brief
February 5, 2010

By Cydney Posner

As reported in a litigation release from the SEC, there is a new settlement between Bank of America Corporation and the SEC related to the disclosures (or lack thereof) in the bank's proxy statement in connection with its acquisition of Merrill Lynch. A copy of the litigation release can be found online. 

In this version of the settlement, Bank of America will pay $150 million. We will have to wait and see if Judge Rakoff likes this one any better than the earlier version that he disapproved. Of course, Bank of America is hardly off the hook in light of the new charges filed by Andrew Cuomo, New York's Attorney General, against the bank, its CEO and CFO as reported by The New York Times.

The interesting aspect of the SEC settlement is that it imposes a number of corporate governance reforms that the bank must retain for at least three years:

  • Retain an independent auditor to perform an audit of the bank's internal disclosure controls, similar to an audit of financial reporting controls currently required by the federal securities laws;
  • Have its CEO and CFO certify that they have reviewed all annual and merger proxy statements;
  • Retain disclosure counsel who will report to, and advise, the board's audit committee on the bank's disclosures, including current and periodic filings and proxy statements;
  • Adopt a "super-independence" standard for all members of the board's compensation committee that prohibits them from accepting other compensation from the bank;
  • Maintain a consultant to the compensation committee that would also meet super-independence criteria;
  • Provide shareholders with an annual non-binding "say on pay" with respect to executive compensation; and
  • Implement and maintain incentive compensation principles and procedures and prominently publish them on BofA's website.

Will these requirements be the wave of the future?

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