A federal judge on Monday rejected Bank of America's $33 million proposed settlement with the Securities and Exchange Commission over allegations it misled shareholders about Merrill Lynch bonuses. The rebuke came amid reports that top bank executives could soon face charges from New York's attorney general over similar accusations.

In his order, U.S. District Judge Jed Rakoff in Manhattan attacked the settlement reached last month as unfair and unreasonable, and told the two parties to prepare for a Feb. 1 trial date. The ruling prevents the bank from closing one aspect of a multilevel investigation of the 2008 Merrill acquisition and promises to dredge up more bad publicity for Bank of America and chief executive Ken Lewis.

The judge said the settlement unfairly left shareholders footing the bill. The agreement "was a contrivance designed to provide the SEC with the facade of enforcement and the management of Bank of America with a quick resolution of an embarrassing inquiry — all at the expense of the sole alleged victims, the shareholders," Rakoff wrote.

Rakoff also said the SEC didn't dig deeply enough into who was responsible for preparing a proxy statement sent to shareholders last year before they voted on the deal. The agency has said the document misled shareholders about the bank's approval of $3.6 billion in bonuses paid to Merrill executives before the deal closed.

Bank of America said it disagreed with the ruling and will consider its legal options in coming days. The bank also continued to say the bonuses were properly disclosed. "We are prepared to prove that through litigation," spokesman Scott Silvestri said.

SEC spokesman John Nester said the agency believes the proposed settlement "properly balanced all of the relevant considerations," and will review the order.

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