BofA settles with investors, but what about reps?

Bank of America Corp.'s willingness to settle with investors about the messy acquisition of Merrill Lynch & Co. Inc. in 2009 may not extend to former Merrill advisers. On Friday, the bank agreed to a $2.43 billion settlement of a shareholder class action alleging that the company and its executive issued false and misleading statements regarding the acquisition of Merrill during the financial crisis. The bank's management denied the allegations but said they wanted to settle the matter. “Resolving this litigation removes uncertainty and risk and is in the best interests of our shareholders,” chief executive Brian Moynihan said in a statement. “As we work to put these long-standing issues behind us, our primary focus is on the future, and serving our customers and clients.” Lawyers representing about 1,000 financial advisers who left Merrill after the merger and were denied deferred compensation accrued at the brokerage are hoping the bank is ready to put that issue behind them, as well. “Hopefully, Bank of America is coming to grips with the liabilities they created with the merger and will try to resolve them,” said Michael Taaffe, a managing partner at Shumaker Loop & Kendrick LLP. He represents roughly 1,000 former Merrill brokers who have filed claims against the firm with the Financial Industry Regulatory Authority Inc. “There's a way to globally resolve these cases and we've attempted to in the past. They just need to be reasonable about it.” Last month, the brokerage made a $40 million settlement offer that would give advisers who left Merrill after having less than $500,000 in production in the 12-month period before the merger 40% to 60% of their deferred compensation. The proposal to smaller producers was agreed to by litigants' attorneys on August 12. So far, however, it's not clear how many of the claimants will agree to the offer, and how many will object or opt out. Indeed, former members of the Thundering Herd were heartened by a $10.2 million Finra arbitration award given in April to two former brokers. Tamara Smolchek and Meri Ramazio. The disputes essentially center on the question of whether Merrill brokers had “good cause” to leave the firm after the merger and therefore qualify for the deferred compensation they forfeited. David Gehn, a lawyer with Gusrae Kaplan Bruno & Nusbaum PLLC, who represents several former Merrill brokers, also is optimistic that the bank will want to resolve the advisers' claims. “There's no direct correlation between the shareholder suit and the adviser litigation, but it seems like Bank of America is smartly looking to close the chapter on the financial crisis,” Mr. Gehn said. “They wouldn't have to worry about getting Smolcheked again.” Higher-producing advisers who took retention money to stay with the firm and waived their rights to file claims if they left later have been offered nothing. “We continue to believe that these claims have no merit,” said Bank of America spokesman William Halldin. “Those who participated in the advisor transition program were offered substantial retention payments to stay at Bank of America following the merger and signed agreements agreeing to participate in the program.”