Under the so-called new and improved SEC settlement with Bank of America, the bank will pay $150 million to settle the charges. According to court records, the settlement only “contemplates” that the sum will be paid, at some future date, to shareholders who were harmed by the bank’s non-disclosure of material facts.
But where is this money coming from? Funny, that’s B of A’s shareholders, too. To add to the insult, no details are provided as to exactly when investors would receive such compensation (from themselves, that is). One sees the handiwork of Groucho Marks all over the SEC’s arrangement. We hope U.S. District Court Judge Jed Rakoff, a much respected figure on these pages who rejected the SEC’s previous deal, will see beyond the mustache and glasses that mask the “hello, I must be going” settlement.
The SEC has become famous over the years for this kind of shell game, where it looks like something significant is being done but where there is much less than meets the eye when all is said and done. If there is any payment of a penalty, all or at least a substantial part should be made directly by the officers and directors (past and current) on whose watch the bank’s failures to disclose material information occurred. It was shareholders who were deprived of the information to which they were entitled. It serves neither their interests, nor those of justice, to have their money taken from one pocket and put into the other.
We examine other weakness in the settlement in a further comment.