DENVER—The head of the Securities and Exchange Commission said Monday it would be “troubling” if her agency had been “deliberately excluded” from talks about Bank of America Corp.’s acquisition of Merrill Lynch.
SEC Chairman Mary Schapiro said she expected more details about the transaction to be divulged in the near future and emphasized the obligation to disclose information rests with companies. Her comments to a crowd of business reporters and editors came after reports last week detailing testimony from Bank of America Chief Executive Kenneth Lewis.
Lewis told New York Attorney General Andrew Cuomo that he believed former Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke wanted him to stay quiet about the deteriorating terms of the takeover, including massive fourth-quarter losses and hefty bonuses paid to its executives.
Cuomo is investigating whether Bank of America and Merrill failed to provide proper disclosures to shareholders about the bonuses, which came as Bank of America requested more federal aid to help it absorb losses linked to the investment bank.
Spokesmen for the Fed and Paulson have denied pressuring Lewis to get the deal done and not to disclose his concerns about Merrill’s finances.
Schapiro called material disclosures “the lifeblood of capital markets,” during a speech to the Society of American Business Editors and Writers. She also discussed her plans to revitalize the SEC and proposals that would shareholders more say in the election of company directors.
Schapiro said the SEC has about 150 ongoing hedge fund investigations, including alleged Ponzi schemes and misappropriations.
In addition, the agency has about two dozen municipal securities probes under way involving possible offering fraud, public corruption and violations of price transparency. It also has more than 50 investigations into credit default swaps, collateralized debt obligations and other financial derivatives, Schapiro said.
The swaps, a form of insurance against loan defaults, are traded in a secretive market valued at around $60 trillion. They figured prominently in the credit crisis that brought the downfall of Lehman Brothers, a government bailout of insurer American International Group Inc. and the sale of Merrill Lynch to Bank of America. Schapiro has been among the regulators calling for new regulation of the swaps.
Collateralized debt obligations, or CDOs, are complex financial instruments that combine various slices of debt.
“There has never been a time when investors have needed a strong advocate more than they do today,” Schapiro said. “They understandably lack confidence in the markets as vehicles to support their financial security.”
Among the changes under consideration is a proposal that would make it easier for shareholders to nominate directors, potentially making company boards more accountable for risks. Other proposals would improve disclosure about municipal securities, regulate hedge funds and seek whistleblower authority.
