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Bank of America's record $16.65 billion settlement with several government agencies over the sale of toxic residential mortgage-backed securities (RMBS) has been stalled by an internal disagreement within the U.S. Securities and Exchange Commission (SEC), according to sources familiar with the case in a report from Bloomberg News.
SEC's five commissioners are reportedly disagreeing over whether or not to waive certain sanctions that go into effect when the settlement, which was announced in August 2014, is entered in court. The sanctions, if enacted, could adversely affect Bank of America's asset management business and ability to raise capital.
Bank of America has requested relief from the sanctions, an action that was once routine but is now anything but. Sources say that the two Democratic commissioners refuse to allow Bank of America a pass on the sanctions, while the two Republican commissioners are in favor of waiving the extra penalties. With SEC Chair Mary Jo White not participating due to a conflict, the two Democrats and Republicans are deadlocked on whether or not to waive the additional sanctions, according to sources.
Banks that enter into settlements normally seek waivers from three main sanctions. The two major ones involve a ban on managing mutual funds and a ban on banks raising money for private companies. The third, which would not have as much consequence with Bank of America as the other two, would prevent the bank from issuing its own shares or bonds unless the SEC gives prior approval.
The sources say Bank of America wants to continue seeking investors for private firms. They say the SEC is likely to allow the bank to continue managing mutual funds, but that it is unlikely the SEC will grant the bank the waiver for the other sanctions.
