A US federal judge has reluctantly approved Bank of America's proposed $150m settlement with financial market regulators over its takeover of Merrill Lynch.
Judge Jed Rakoff of the US District Court for the Southern District of New York said he approved the deal between Bank of America and the Security and Exchange Commission (SEC) after receiving new evidence on the complaints that Bank of America misled its shareholders in buying nearly bankrupt Merrill.
'The court reluctantly grants' the SEC's motion to settle the cases after Bank of America confirmed an SEC statement of facts showing the bank acted negligently, but not intentionally, in failing to disclose to shareholders huge bonuses and losses at Merrill, he said.
'While better than nothing, this is half-baked justice at best.'
The settlement proposal's 'greatest defect it that it advocates very modest punitive, compensatory, and remedial measures that are neither directed at the specific individuals responsible for the nondisclosures nor appear likely to have more than a very modest impact on corporate practices or victim compensation,' he said.
Under the proposal, Bank of America agreed to take remedial actions over the next three years aimed at improving transparency and addressing concerns about lavish executive pay that some blame for excessive risk taking that fueled the financial crisis.
The bank is to use an independent auditor, disclosure counsel and compensation consultant.
To complete the settlement, the SEC and Bank of America must provide the court with a deal revised to incorporate expanded information by Thursday, Rakoff said.
Had he rejected the deal, a trial would have begun next week.
The SEC alleges that Bank of America hid from its shareholders that it had authorised Merrill Lynch to pay $3.6 billion in bonuses, despite the investment bank's colossal losses in 2008.
The chief market regulator subsequently accused Bank of America of having misled shareholders about Merrill's losses to obtain their approval of the takeover.
The lavish bonuses paid by struggling Merrill on December 29, 2008, just before its government-backed purchase by Bank of America on January 1, sparked public outrage in the US.
Bank of America weathered the global financial crisis with $45 billion in government aid from the Troubled Asset Relief Program. Bank of America repaid the TARP bailout in December.
