Faculty Notes

Prof. Ronald Colombo Comments in Law360 Story on BofA’s Settlement With SEC

Ronald J. Colombo, Associate Dean for Academic Affairs and Professor of Law

BofA’s SEC Admission Likely To Disappoint Plaintiffs Attys
By Ed Beeson
August 21, 2014


“Requiring an admission of wrongdoing as part of Bank of America’s agreement to resolve the SEC charges filed today provides an additional level of accountability for its violation of the federal securities laws,” Rhea Kemble Dignam, director of the SEC’s Atlanta regional office, said in a statement accompanying Thursday’s settlement.

This is the latest time the SEC has flexed a seldom-used power that Chairwoman Mary Jo White has pushed into the spotlight: the power to refuse to let enforcement targets settle claims without admitting or denying wrongdoing. …

Aggrieved investors could seize on the admission as a tool to litigate claims. “I certainly think this admission opens up the bank to future civil claims, as it cannot deny any allegations that would contradict its admissions to the SEC,” said Jill Gross, a professor at Pace Law School in White Plains, New York.

But Hofstra University School of Law professor Ronald Colombo and other attorneys point out that, at least in this instance, the tool may have mostly lost its edge.

That’s because the disclosures at issue cover the second and third quarters of 2009 and were filed on Aug. 7 and Nov. 6, 2009, respectively, according to the SEC’s order. For a fraud claim brought under Rule 10b-5 of the Securities Exchange Act, the five-year statute of repose likely began ticking the moment the misrepresentation or omission was made, attorneys say. That would feasibly leave only the Nov. 6 disclosure open to a timely challenge.

“Maybe that explains why they are so happy to admit it,” Colombo said. He said the bank’s counsel likely weighed the private litigation risk as they were negotiating a settlement.

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