* McCann's suit seeks release from noncompete clause
* Negotiations between bank and McCann continue
* McCann has been linked to a top job at UBS AG

Robert McCann, former head of Merrill Lynch's wealth management unit, is in talks to settle a suit he filed Aug. 24 against Bank of America Corp (BAC.N) seeking to lift a noncompete clause, allowing him to join a chief rival, a source with direct knowledge of the situation said.

McCann, a three-decade Merrill Lynch veteran, has been linked to UBS AG (UBSN.VX), potentially becoming the Swiss financial giant's head of wealth management in the Americas.

The source declined to comment on the record because the talks are private and doesn't have permission to speak publicly about the matter.

A Bank of America spokesman and UBS spokeswoman declined to comment.

McCann's suit, filed Aug. 24 in New York Supreme Court, alleges Bank of America failed to accept legitimate reasons for his Jan. 5 resignation -- less than a week after Merrill Lynch was acquired by Bank of America -- and instead terminated him in early February, leaving a more restrictive noncompete clause in place.

McCann alleges that his position as head of Merrill Lynch's wealth management unit was marginalized in the combined company.

His suit requests the court lift the noncompete agreement, and award additional relief it sees fit.

The case is McCann v. Bank of America Corp, New York State Supreme Court (Manhattan), No. 602628/2009. (Reporting by Joe Rauch; Editing by Tim Dobbyn)