Citing a danger of confusion to a jury U.S. District Judge Jed Rakoff refused to allow the SEC to add allegations that the bank failed to disclose what it called extraordinary losses at Merrill before shareholders voted on December 5, 2008 on the companies' merger.
I really worry that a jury, which is my highest concern, would be confused by that double focus, Rakoff said near the end of an hourlong hearing. The great beauty of the present complaint is it's very simple, very straightforward.
The SEC did not immediately return a call for comment.
Bank of America spokesman Bob Stickler said the bank was pleased with the ruling.
Rakoff's decision clears the way for the case to go to trial on March 1 as scheduled, a date he repeated will not change.
His ruling is the latest embarrassment in the case for the SEC, which is working to restore its image after missing Bernard Madoff's alleged $65 billion Ponzi scheme.
In September, Rakoff rejected the SEC's proposed $33 million settlement with the largest U.S. bank by assets.
He said at the time the settlement could not remotely be called fair, noting it did not require disclosures of names of individual executives and lawyers who approved the bonuses.
The SEC complaint does not name individuals, including bank employees and lawyers who provided advice on the merger, as defendants.
SEC COULD STILL SUE SEPARATELY
The SEC had attempted in its amended complaint to argue that Bank of America learned before the shareholder votes that Merrill had losses of $4.5 billion in October and billions of dollars more in November.
Scott Black, a lawyer for the judge, it was not unusual for the SEC to take years to bring charges in cases of magnitude such as this.
Yet Bank of America objected, saying the SEC inexcusably waited until just over two months before trial to raise its new claims. It claimed that this delay reflected a lack of diligence and was prejudicial.
Rakoff ruled against the SEC without prejudice, leaving open the possibility that the agency could sue Bank of America about the losses separately.
It would appear to me that there is no impediment to your bring this as a separate case, Rakoff told Black.
Merrill suffered a $15.8 billion loss in the fourth quarter of 2008, an amount that did not surface publicly until January 2009 after the merger had already closed.
This and the federal government's role in seeing the merger through, including an infusion of taxpayer money into Bank of America, triggered a series of investigations by Congress and others, including New York Attorney General Andrew Cuomo.
Bank of America shares closed up 15 cents at $16.93 on Monday on the New York Stock Exchange.
(Reporting by Elinor Comlay and Jonathan Stempel in New York and Rachelle Younglai in Washington; Editing by Tim Dobbyn, Bernard Orr)