Bank of America has agreed to settle Securities and Exchange Commission charges stemming from its 2009 acquisition of Merrill Lynch. As part of the settlement, Bank of America will also pay $150 million to shareholders harmed by the bank's alleged failure to disclose information about bonuses and losses at subsidiary Merrill Lynch.
"Our agreement along with the SEC settlement will result in better protections for consumers and stockholders," said North Carolina Attorrney General Roy Cooper, whose state was a party to the settlement.
The federal government will propose a plan for distributing the money to shareholders at a later date.
Cooper launched an investigation at about the same time the SEC did. The attorney general's office merged its probe with the federal government's own investigation. Cooper said his office began its investigation after Merrill Lynch paid $3.6 billion in employee bonuses just days before Bank of America completed its purchase of the investment firm on January 1, 2009.
Soon after, Merrill Lynch reported losses of more than $15 billion for the fourth quarter of 2008.
Under the agreements, Bank of America has agreed for three years to:
- Retain an independent auditor to audit the Banks internal disclosure controls, similar to an audit of financial reporting controls currently required by federal securities laws.
- Have its Chief Executive and Chief Financial Officers 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 Banks 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 meets super-independence criteria.
- Provide shareholders with an annual non-binding say on executive compensation.
- Implement and maintain incentive compensation principles and procedures and prominently publish them on Bank of America's website.
In addition to the SEC settlement, Cooper also won agreement from Bank of America to meet with his office twice a year to discuss compliance with the agreement, and to maintain its anonymous hotline to encourage employees to report potential violations or problems to the banks auditors. Bank of America will also pay $1 million to the North Carolina Department of Justice for consumer protection and education efforts.
