Judge blasts SEC and Bank of America

Court says the financial watchdog needs to disclose why it didn't pursue allegations that the bank lied about Merrill Lynch bonuses.

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NEW YORK (Reuters) -- A federal judge on Tuesday ordered the U.S. Securities and Exchange Commission to do a better job of explaining why it did not pursue allegations that Bank of America Corp. lied in its proxy statement about its approval of bonuses for Merrill Lynch & Co. employees.

U.S. District Judge Jed Rakoff also wants to know why the bank agreed to a $33 million settlement with the SEC if it believed there was nothing false and misleading in the proxy statement. He said if the bank did so "to curry favor with the SEC or to avoid retaliation by the SEC, the court needs to know the specifics."

Rakoff said it was "puzzling" that the regulator accepted statements by bank executives that they relied on their lawyers as to what disclosures were made in the proxy statement given to shareholders who voted on the merger.

He said it is "at war with common sense" for executives to rely on counsel and then not waive attorney-client privilege, saying "the culpability of both the corporate officer and company counsel will remain beyond scrutiny."

Rakoff must sign off on the settlement over the bonuses, which would total $3.6 billion. He directed both parties to submit new papers by Sept. 9. To top of page

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