SEC, BofA Reach Agreement over Merrill Disclosure

The Securities and Exchange Commission has entered an agreement with Bank of America over the disclosure of information in the Merrill Lynch bonuses case, the SEC said Tuesday.

Sharon Lorimer

The agreement is subject to approval by a federal judge and, if approved, would mean a broad waiver of Bank of America's attorney-client privileges, according to an SEC news release. The order would authorize the SEC to share information with other regulators.

"In particular, the order negotiated by the SEC would allow us to assess further details surrounding the Bank's failure to disclose to its shareholders critical information concerning the award of bonuses to Merrill employees, including any relevant information previously withheld based on attorney-client or other privileges," SEC Spokesman John Heine said in the statement.

The order would allow the SEC to investigate details of Bank of America's decisions about whether to disclose impairment of goodwill and other financial results of Merrill Lynch during the fourth quarter of fiscal year 2008 as well as its communications with the Federal Reserve, the Treasury and other federal officials regarding aid.

It will also allow the probing of previously privileged details of Bank of America's consideration on invoking the material adverse change clause in its agreement to merge with Merrill Lynch, the statement said.

Cuomo to Also Get Documents

Bank of America sent a letter to New York Attorney General Andrew Cuomo detailing the points of agreement for the period between September 12, 2008 through January 16, 2009.

"Our intention is to provide you with information and documents that will permit you to understand the contemporaneous communications with counsel during the time period that the events were taking place," the letter said.

"To be clear, we do not intend to waive any privileges or to produce any privileged documents that were created after the events at issue or that relate solely to private litigation against Bank of America or Merrill Lynch and/or their officers and directors," it said.

Bank of America's board voted Friday to waive attorney client privilege and turn over documents requested by Cuomo.

The decision suggests BofA is taking a more conciliatory approach to dealing with Cuomo in the wake of CEO Ken Lewis's decision to step down as CEO at the end of this year.

Separately, a corporate law judge on Monday refused to throw out a lawsuit blaming Lewis and the board of directors for failing shareholders in its purchase of Merrill Lynch.

But Vice Chancellor Leo Strine said the case could be an "exceedingly difficult" one to prove against outside directors, which means all members of the board except Lewis, Dow Jones said.

Last Tuesday a team from Cuomo's office met with BofA's lawyers. Initially the bank resisted the attorney general's request to waive attorney-client privilege and turn over additional documents linked to Bank of America's purchase of Merrill last year.

Cuomo has been investigating whether material information was withheld from shareholders prior to the Merrill deal being finalized.  The questions center on what and when Bank of America executives knew about Merrill's mounting losses and the billions in bonuses paid to Merrill employees and why this information wasn't shared with investors.

Some BofA executives deposed by Cuomo said in withholding certain information about the deal, they acted on advice of counsel.

Citing attorney-client privilege the bank had declined to hand over records the attorney general's office believes are critical in determining whether the executives did indeed act on counsel's advice, or did so on their own.

- CNBC reporter Mary Thompson contributed to this report