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January 12, 2010 2:40 PM

SEC: Sure, Judge Rakoff, We'll File Another Suit

Posted by Zach Lowe

Who wants yet another update on the Bank of America-Merrill Lynch litigation? You do? Well, here you go: After being told late Monday it could not tack on a new charge to its original complaint against BofA, the SEC wasted no time in filing a separate lawsuit charging the bank with failing to adequately disclose to shareholders the extent of Merrill Lynch's fourth-quarter losses when it bought Merrill in 2008, according to Bloomberg

Yes, this means that there could (in theory) be two separate trials in federal district court in Manhattan over BofA's alleged disclosure violations in the Merrill deal. The SEC's new filing today comes after Judge Jed Rakoff ruled that the SEC's original suit must be limited to charges that the bank failed to inform shareholders that Merrill had earmarked as much as $5.8 billion for executive bonuses at the end of 2008. (The bank, citing the advice of its outside counsel at Wachtell, Lipton, Rosen & Katz, mentioned the bonus only in a confidential filing it referred to obliquely in public merger documents, a move the bank has said is common and legal). The SEC moved on New Year's Eve to add a charge concerning the fourth-quarter losses, but Rakoff ruled Monday that such a move would only confuse jurors and delay a trial on the bonus issues. 

He left the door open, however, for the SEC to file a separate lawsuit, and the agency did so today. The agency isn't exactly getting rave reviews for its tactics in the case. This morning in The New York Times, Steven Davidoff and Peter Henning speculate that the SEC is doing everything it possibly can to force a settlement and get out of these cases. 

The bank has retained Wachtell, Paul, Weiss, Rifkind, Wharton & Garrison, and Cleary Gottlieb Steen & Hamilton in the SEC litigation. 

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