Boston, MA 12/13/2013 (wallstreetpr) – Bank of America Corp (NYSE:BAC) has to cough up $131.8 million as a penalty against a settlement which arised due to Merrill Lynch’s bundling and selling of a series of mortgage securities.
The order
On Thursday, Securities and Exchange Commission (S.E.C.) passed an order which accuses Bank of America’s Merill Lynch division of structuring and selling two complex mortgage securities which mislead investors.
Also, SEC addedthat Merrill Lynch did not take step to disclose to the investors that the fund manager Magnetar Capital LLC was majorly involved in selecting collateral worth almost 3 billion Octans I and Norma CDO I in 2006 and 2007 respectively.
The SEC furtherstated that Magnetar held a large part of equity position in the CDOs that gave it a major leverage to influence the holdings and also hedge them by shorting positions. However, the regulators concluded that the Magnetar’sinterest were not aligned to that of the investors, who primarily wanted the CDOs as well as their collateral to run well.
SEC Clears Magnetar Involvement
In the probe, SEC gave clean chit to Magnetar for being involved in any kind of fault or liability. Magnetar reported that it has been issued with a closing letter from SEC in connection with the investigation of Bank of America and Magnetar.
Bank of America’s spokesman, William Halldin, said that the bank stands satisfied with the settlement order that preceded Bank of America’s acquisition of Merrill Lynch. He also informed that the bank has kept a provision to pay for the settlement cost.
The S.E.C. is expected to issue a closing letter to a party under investigation in a case which has been subjected to a considerable scrutiny. However, the letter does not rule out reopening of case by the regulators in case any new information surfaces and is important to be looked at.
