Compliance August 3, 2009

SEC Charges BofA $33M for Violations Related to Merrill Deal

The Securities and Exchange Commission (SEC) today charged Bank of America Corporation (BofA) for misleading investors about billions of dollars in bonuses paid to Merrill Lynch & Co. executives at the time of its acquisition of the firm.

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Bank of America agreed to settle the SEC’s charges and pay a penalty of $33 million, according to a news release from the SEC.

The SEC alleges that when BofA was proposing the acquisition of Merrill to shareholders, proxy materials stated that Merrill had agreed to not pay year-end performance bonuses or other discretionary compensation to its executives prior to the closing of the deal without BofA’s consent. BofA had actually already contractually authorized Merrill to pay up to $5.8 billion in discretionary bonuses to Merrill executives for 2008, according to the SEC.

Therefore, the SEC said the disclosures to shareholders were rendered materially false and misleading. “As Merrill was on the brink of bankruptcy and posting record losses, Bank of America agreed to allow Merrill to pay its executives billions of dollars in bonuses,” said David Rosenfeld, associate director of the SEC’s New York Regional Office. “Shareholders were not told about this agreement at the time they voted on the merger.”

According to the SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, BofA had agreed that Merrill could pay up to $5.8 billion, or nearly 12% of the $50 billion merger consideration, in discretionary bonuses to its executives.

The merger agreement was included as an appendix and summarized in the joint proxy statement that was distributed to all 283,000 shareholders of both companies. However, BofA’s agreement to allow Merrill to pay the bonuses was in a separate document omitted from the proxy statement and never disclosed before the shareholders’ vote on the merger, according to the SEC.

BofA settled the SEC’s charges without admitting or denying the allegations. In addition to paying the financial penalty, BofA consented to the entry of a judgment that permanently enjoins the bank from violating the proxy solicitation rules. The settlement is subject to court approval and the SEC’s investigation is ongoing.

Data & Research August 3, 2009

Most Small-Business Owners Expect Rebound Soon

Though the economy still tops their list of concerns, the majority of surveyed small-business owners said they expect an economic turnaround this year or next.

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More than 58% of small-business owners expect an economic turnaround in 2010, while 14% anticipate a rebound by the end of 2009, according to the most recent Business Confidence Survey by Administaff. Fourteen percent of owners said they think the recovery will be in 2011 or later.

A press release of the results said the economy was listed by 83% of business owners as their biggest concern for 2009, followed by government health care reform (53%), controlling operating costs (44%), and rising health care costs (33%). However, for 2010 and later, concern about the overall state of the economy fell to fourth place.

In the survey conducted late last month, 60% of participants said they are maintaining current staffing levels, while 23% are adding new positions, up from the 18% in the survey conducted three months ago. Layoffs were named by 16% of respondents as a current management strategy, versus 19% in May.

The survey also revealed that 68% of participants expect to maintain employee compensation at current levels for the remainder of this year; 10% plan increases; 6% expect decreases; and 16% were unsure.

Sixty percent of surveyed owners and managers said they are either meeting or exceeding their 2009 performance plans, with the remaining 40% reporting that they are doing worse than expected.

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