Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Regulation and Compliance > Federal Regulation > SEC

Bank of America Granted Penalty Relief After SEC Compromise

Your article was successfully shared with the contacts you provided.

The U.S. Securities and Exchange Commission has resolved an impasse over punishing Bank of America Corp. in a mortgage case, clearing the way for the lender to complete a $16.7 billion global settlement, people familiar with the matter said.

In a private meeting yesterday, SEC commissioners voted to waive most of a set of additional sanctions that would kick in when the settlement is entered into court, according to the people, who asked not to be named because the decision hasn’t been made public. The bank did get hit with a penalty that takes away its ability to issue more shares or bonds without SEC approval each time.

The SEC decision came as Bank of America and the agency were reaching a deadline for having a federal judge in North Carolina sign off on the settlement. The two sides had twice sought more time from the court as negotiations dragged on.

The agreement ends a legal headache for Bank of America, which, like most Wall Street firms, has been trying to settle numerous government probes that arose after the 2008 financial crisis. Last week, the bank was one of several companies fined by the Office of the Comptroller of the Currency in connection with a foreign-exchange manipulation investigation.

At the SEC, the hold-up was a 2-2 deadlock between Republican and Democratic commissioners. Chair Mary Jo White, who as a private attorney represented ex-Bank of America Chief Executive Officer Kenneth Lewis, was recused.

John Nester, a spokesman for the SEC, declined to comment, as did Lawrence Grayson, a spokesman for Bank of America.

Recidivist Firms

The penalty waivers, once a routine job handled by staff, have in recent months become a flashpoint at the five-member commission. Democratic Commissioners Luis Aguilar and Kara Stein have pushed to debate many exemptions, arguing that the extra penalties may be appropriate for recidivist Wall Street firms.

There were three main sanctions at issue in the Bank of America matter.

In its vote, the commission granted a full waiver on the harshest penalty, which would have barred the bank from managing mutual funds, the people familiar with the matter said. The commission also refused to halt a punishment that precludes the bank from raising capital without jumping through regulatory hoops.

Partial Waiver

The commissioners compromised by granting a partial waiver on the third penalty, which would have banned the bank from helping clients such as hedge funds raise money in private share sales. The agreement allows the firm to continue the work it already does in this area for 30 months, the people said.

During that time, the bank will have to hire an independent consultant to monitor its policies and procedures and compliance. The bank will need to reapply to the SEC for full relief and the application must be signed by the chief legal officer or chief executive, the people said.

With the additional penalties decided, the SEC and Bank of America are likely to enter the settlement in court later today, the people said.

The case is part of a deal the bank struck in August with the Justice Department, state attorneys general and other regulators over claims that it sold souring mortgage securities without disclosing all the risks to investors. Most of the alleged wrongdoing involved Merrill Lynch & Co. and Countrywide Financial Corp., companies Bank of America bought.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.