Bank of America (BAC) said early Friday that it had reached a settlement to end a class-action lawsuit with investors and will pay $2.43 billion, while also making certain corporate-governance reforms. According to industry experts, the lawsuit and its resolution should have a negligible impact on the thundering herd of Merrill Lynch and Merrill Edge advisors.
The suit—which entails the biggest settlement arising from the 2008 financial crisis—was brought against the firm in 2009 in relationship to shareholders who purchased or held Bank of America securities when the company announced plans to acquire Merrill Lynch. Though it reached the settlement, BofA maintains that it did not make false or misleading statements about the financial health of the institutions involved in the merger.
“Resolving this litigation removes uncertainty and risk and is in the best interests of our shareholders,” said CEO Brian Moynihan (left), in a press release. “As we work to put these long-standing issues behind us, our primary focus is on the future and serving our customers and clients.”
On Friday, BofA shares traded down 1% at $8.90, down more than 66% from September 2008, when plans for the merger were first made public.
The governance reforms to be instituted or continued through early 2015 include measures associated with majority voting in director elections, the annual disclosure of noncompliance with stock ownership guidelines, policies for a board committee regarding future acquisitions, the independence of the board’s compensation committee and its compensation consultants and an annual “say-on-pay” vote by shareholders.
“This has been an ongoing issue for BofA-Merrill for some time,” said Mark Elzweig, an executive-search consultant in New York, in an interview with AdvisorOne. “And even with a large settlement, this should enable [employees and advisors] to put the matter behind them and go forward.”
The recruiting expert notes that in recent years this issue “has not had an impact on the firm one way or another as a brand” from the clients’ perspective. “It’s not an issue that [advisor] clients have been looking at,” Elzweig explained.
On Sept. 14, 2008, BofA—led at the time by Ken Lewis—said it was in talks to buy Merrill. Bob McCann, then head of Merrill Lynch’s brokerage force, moved to UBS about a year later. He quickly hired other Merrill veterans such as Bob Mulholland. BofA soon tapped Citi veteran Sallie Krawcheck to lead Merrill.
In terms of recent recruiting action, the BofA issues have not had an impact, mainly because Merrill’s “not in the game,” said recruiter Rick Peterson of Rick Peterson & Associates in the great Houston area, in an interview at AdvisorOne.