Bank of America 2015 Annual Report Download - page 205

Bank of America 2015 203
On February 20, 2015, CHL, CFSB and BANA filed an appeal.
The Second Circuit held oral argument on December 16, 2015,
but has not issued a decision on the appeal.
Pennsylvania Public School Employees’ Retirement
System
The Corporation and several current and former officers were
named as defendants in a putative class action filed in the U.S.
District Court for the Southern District of New York entitled
Pennsylvania Public School Employees’ Retirement System v. Bank
of America, et al.
Following the filing of a complaint on February 2, 2011, plaintiff
subsequently filed an amended complaint on September 23, 2011
in which plaintiff sought to sue on behalf of all persons who
acquired the Corporation’s common stock between February 27,
2009 and October 19, 2010 and “Common Equivalent Securities”
sold in a December 2009 offering. The amended complaint
asserted claims under Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and Sections 11 and 15 of the Securities
Act of 1933, and alleged that the Corporation’s public statements:
(i) concealed problems in the Corporation’s mortgage servicing
business resulting from the widespread use of the Mortgage
Electronic Recording System; (ii) failed to disclose the
Corporation’s exposure to mortgage repurchase claims; (iii)
misrepresented the adequacy of internal controls; and (iv) violated
certain Generally Accepted Accounting Principles. The amended
complaint sought unspecified damages.
On July 11, 2012, the court granted in part and denied in part
defendants’ motions to dismiss the amended complaint. All claims
under the Securities Act were dismissed against all defendants,
with prejudice. The motion to dismiss the claim against the
Corporation under Section 10(b) of the Exchange Act was denied.
All claims under the Exchange Act against the officers were
dismissed, with leave to replead. Defendants moved to dismiss a
second amended complaint in which plaintiff sought to replead
claims against certain current and former officers under Sections
10(b) and 20(a). On April 17, 2013, the court granted in part and
denied in part the motion to dismiss, sustaining Sections 10(b)
and 20(a) claims against the current and former officers.
On August 12, 2015, the parties agreed to settle the claims
for $335 million. The agreement is subject to final documentation
and court approval.
Takefuji Litigation
In April 2010, Takefuji Corporation (Takefuji) filed a claim against
Merrill Lynch International and Merrill Lynch Japan Securities
(MLJS) in Tokyo District Court. The claim concerns Takefuji’s
purchase in 2007 of credit-linked notes structured and sold by
defendants that resulted in a loss to Takefuji of approximately
JPY29.0 billion (approximately $270 million) following an event of
default. Takefuji alleges that defendants failed to meet certain
disclosure obligations concerning the notes.
On July 19, 2013, the Tokyo District Court issued a judgment
in defendants’ favor, a decision that Takefuji subsequently
appealed to the Tokyo High Court. On August 27, 2014, the Tokyo
High Court vacated the decision of the District Court and issued
a judgment awarding Takefuji JPY14.5 billion (approximately $135
million) in damages, plus interest at a rate of five percent from
March 18, 2008. On September 10, 2014, defendants filed an
appeal with the Japanese Supreme Court. The appeal hearing
occurred on February 16, 2016. The Corporation expects a
judgment to be issued in the coming months.
U.S. Securities and Exchange Commission (SEC)
Investigations
The SEC has been conducting investigations of the Corporation’s
U.S. broker-dealer subsidiary, MLPF&S, regarding compliance with
SEC Rule 15c3-3. The Corporation is cooperating with these
investigations and is in discussions with the SEC regarding the
possibility of resolving these matters. There can be no assurances
that these discussions will lead to a resolution or whether the SEC
will institute administrative or civil proceedings. The timing,
amount and impact of these matters is uncertain.