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Ahead of our upcoming webcast with a group of senior NYSE Staffers – “The NYSE Speaks ’09: Latest Developments and Interpretations” – the NYSE has issued proposals to amend its corporate governance listing standards. These proposals will be analyzed during the program. It’s been quite a while since the standards were last revised…

Where Were the Lawyers? Judge Rakoff Asks in BofA Settlement Case

Back from vacation and I see that things have heated up in the case where US District Court Judge Jed Rakoff’s decision to not approve a $33 million settlement between the SEC and Bank of America over allegations of misleading proxy materials because the bonus obligations due to Merrill Lynch employees were not fully disclosed. When I left a few weeks ago, the Judge was about to hold a hearing to discuss the issues involved. At the hearing, he asked for briefs from both parties by August 24th.

On the 24th, the SEC and Bank of America submitted the briefs as requested by the Judge. Here is the brief submitted by the SEC, including the controversial Disclosure Schedule that was not included in the proxy materials as Exhibit A. Here is Bank of America’s brief that asserts that obligation to pay bonuses was disclosed.

As noted in this NY Times article, Judge Rakoff’s request for documentation regarding who was responsible for the decision not to disclose Merrill’s bonuses resulted in both parties blaming the lawyers in their briefs. Although as Tom Gorman notes, “The briefs read as if they were filed in two different cases.”

On August 25th, Judge Rakoff – apparently not very happy with the briefs – issued this order. As noted by Barbara Black in the “Securities Law Prof Blog“:

Judge Rakoff still isn’t satisfied with the explanations given to him by the SEC and the Bank of America about the settlement involving the disclosure (or lack thereof) of Merrill bonuses in the BofA proxy statement. He instructed the SEC to provide more explanation about why it didn’t follow SEC policy and seek penalties from individual defendants. He also didn’t accept the agency’s explanation that its hands were tied because the corporation asserted reliance on advice of counsel as a defense and would not waive the attorney client privilege and give the SEC the documents. How could the corporation base a defense on attorneys’ advice without disclosing the advice? The judge asked for further submissions due September 9th.

The Judge could hold a second hearing on the settlement – or he could approve or reject it after receiving this new rounds of briefs.

Here are a number of commentaries on what has transpired so far:

– NY Times’ Floyd Norris – “The SEC Explains”

– Washington Post’s Zach Goldfarb – “SEC’s About-Face on Bank of America Raises Eyebrows”

– Jay Brown’s “Race to the Bottom” – “BofA, the SEC, and the Merrill Lynch Bonuses: The Costs of Legal Representation”

– Tom Gorman’s “SEC Actions” – “The BofA Settlement, Round Two: The Real Issues”

– Tom Gorman’s “SEC Actions” – “The Lawyers Did It?”

– WSJ – “Judge Rips SEC on BofA Pact”

– NY Times – “Plain Talk From Judge Weighing Merrill Case”

– Reuters – “BofA to settle Merrill lawsuit for $150 million”

– Reuters – “SEC may wield stronger hand after BofA bonus case”

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– Broc Romanek