Bank of America Corp's defense against civil charges it misled investors during its takeover of Merrill Lynch & Co suffered a setback on Monday when a judge ruled that the bank may not present as trial evidence media reports that it told shareholders to ignore.

The Charlotte, North Carolina based bank was sued by the U.S. Securities and Exchange Commission over accusations it misled shareholders over the bonuses Merrill paid during the final months of 2008 at the height of the financial crisis.

Last September, U.S. District Court Judge Jed Rakoff rejected a proposed $33 million settlement with the SEC over the $3.6 billion of bonus awards and rebuked the market regulator and the bank's deal as a contrivance.

According to the SEC, Bank of America said in a November 2008 proxy statement that Merrill agreed not to pay bonuses, even though the bank had already agreed to Merrill paying as much as $5.8 billion.

The bank has argued that shareholders already knew from media reports that Merrill was expected to pay year-end bonuses.

In an opinion on Monday, Rakoff ruled that the bank could not offer the media reports as testimony because the proxy statement told shareholders not to rely on the media.

One must ask what a reasonable investor would reasonably consider the total mix of information in this case, Rakoff wrote in the opinion in Manhattan federal court. The answer is that since the bank itself warned investors not to rely on the media, it would be unreasonable for a shareholder to consider the media pronouncements to be part of the relevant mix of information.

A spokesman for Bank of America could not immediately be reached for comment on the opinion. The civil trial is scheduled to start on March 1.

Rakoff wrote that Bank of America is arguing that, even though it expressly warned its shareholders to disregard the media, it can now defend itself by asserting that a reasonable shareholder would have disregarded those warnings and, by consulting the media, perceived that the Bank's alleged lies were immaterial.

Even a zealous advocate might perceive that such an argument hints at hypocrisy, Rakoff wrote.

The case is SEC v Bank of America, U.S. District Court for the Southern District of New York, No. 09-06829

(Additional reporting by Elinor Comlay; Editing by Steve Orlofsky)