The Securities and Exchange Commission is examining whether Bank of America Corp. should have informed shareholders about Merrill Lynch bonuses earlier.
Bank of America shareholders approved the bank's purchase of Merrill Lynch on Dec. 5. But the following month, most were surprised to learn that Merrill had rushed out $3.6 billion in bonuses to its employees, even as it lost more than $27 billion over the year.
Rep. Dennis Kucinich, a Democrat from Ohio, wrote to the SEC last week to ask whether Bank of America should have informed its shareholders about the Merrill bonuses before asking them to vote.
SEC chairwoman Mary Schapiro replied to Kucinich on Friday. She said the agency is "carefully reviewing the Bank of America disclosure at this time,” but has not expressed an opinion about whether the bank should have told shareholders about the Merrill bonuses. An SEC spokesman said Tuesday that “one should not infer from the letter the existence or non-existence of an enforcement investigation.”
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Under SEC rules, public companies have four business days to file information about “material” events, which can include buying or selling assets or the departure or hiring of executives. But experts say that companies aren't always required to report negotiations, and shouldn't disclose information before being sure of its accuracy.
According to Kucinich, Bank of America representatives told his staff late last month that it had disclosed everything it was required to before the shareholder vote, and that it had not been required to disclose “the details it then possessed about the potential size of the Merrill bonuses or the expected timing of their payment to Merrill's employees.”
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Bank of America chief executive Ken Lewis told New York Attorney General Andrew Cuomo that he did not find out about the bonuses until after they were awarded around Dec. 8. However, other Bank of America executives were aware of the bonuses before then, according to testimony from Cuomo's office. Also, the original merger agreement signed by Bank of America and Merrill in September allowed for Merrill bonuses.