The holdup of a settlement between the Securities and Exchange Commission and Bank of America over bonuses paid to Merrill Lynch, which Bank of America acquired, has been an embarrassment for the SEC and a rebuke to its settlement process. Yet it could end up with more power when the dust clears. According to a report by Reuters, the Commission may emerge with greater power to extract settlements with real teeth in corporate enforcement cases, even after a federal judge has blocked its high-profile settlement with Bank of America Corp.
U.S. District Judge Jed Rakoff has faulted the SEC for appearing to let the bank off too easily, and dismissed as nonsensical why the bank would agree to pay anything without admitting it had done anything wrong.
Governance experts said the case will strengthen the SEC’s hand in future settlements, as the agency tightens oversight and tries to rebuild a reputation for aggressiveness after a slow year for enforcement. It may also prompt more transparency by companies, even without formal acknowledgment of wrongdoing.