As Reuters reported on Monday, Judge Jed Rakoff has rejected the proposed settlement between Bank of America and the US Securities and Exchange Commission over the bonuses paid to employees of Merrill Lynch.
This is the third time Judge Rakoff has refused to accept the arguments made by the regulator and the investment bank regarding the bonuses. His first refusal came on August 6, when he deferred the matter to a hearing. Then, on August 10, he demanded the SEC and Bank of America produce detailed statements about the case within two weeks.
This time, as Reuters put it:…Rakoff said the settlement “does not comport with the most elementary notions of justice and morality” because it subjects shareholders to a monetary penalty for the bank’s alleged misconduct.
The parties’ arguments “leave the distinct impression that the proposed consent judgment was a contrivance designed to provide the SEC with the facade of enforcement and the management of the bank with a quick resolution of an embarrassing inquiry — all at the expense of the sole alleged victims, the shareholders,” Rakoff said.
Rakoff directed the parties to prepare for a possible trial that would begin no later than February 1, 2010.
How’s that for an activist judge?
Related links:
SEC explanation on Merrill deal ‘puzzling’ – FT
SEC adamant on BofA bonuses – FT