Insider filing report for Changes in Beneficial Ownership
- Schedule 13G & 13D forms are used to report a party's ownership of stock which exceeds 5% of a company's total stock issue.
- Schedule 13G is a shorter version of Schedule 13D with fewer reporting requirements.
"Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise"
- Peter Lynch
What is insider trading>>
- Peter Lynch
What is insider trading>>
Schedule
13D
CUSIP No.
67066Y
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
13D
(Amendment
No. 1)
Under the
Securities Exchange Act of 1934
Nuveen California Dividend
Advantage Municipal Fund
(Name of
Issuer)
AUCTION RATE
PREFERRED
(Title of
Class of Securities)
67066Y
(CUSIP
Number)
David
Lavan, Esq.
O’Melveny
& Myers LLP
1625 Eye
Street, NW
Washington,
DC 20006
(202)
383-5191
(Name,
Address and Telephone Number of Person
Authorized
to Receive Notices and Communications)
July 27,
2011
(Date of
Event Which Requires Filing of this Statement)
If the
filing person has previously filed a statement on Schedule 13G to report the
acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[ ].
*The
remainder of this cover page shall be filled out for a reporting person’s
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The
information required in the remainder of this cover page shall not be deemed to
be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934
(“Act”) or otherwise subject to the liabilities of that section of the Act but
shall be subject to all other provisions of the Act (however, see the
Notes).
Schedule
13D
CUSIP No.
67066Y
|
1.
|
Names
of Reporting Persons
|
Bank of
America
Corporation 56-0906609
|
2.
|
Check
the Appropriate Box if a member of a Group (see
instructions)
|
|
a.
|
_
|
|
b.
|
X
|
|
3.
|
SEC
Use Only
__________________________________________
|
|
4.
|
Source
of Funds (See
Instructions): OO
|
|
5.
|
Check
Box if Disclosure of Legal Proceedings Is Required pursuant to Items 2(d)
or 2(e).
|
|
6.
|
Citizenship
or Place of Organization
|
Delaware
Number of
Shares Beneficially Owned by Each Reporting Person
With:
|
7.
|
Sole
Voting Power:
|
|
8.
|
Shared
Voting Power:
|
|
9.
|
Sole
Dispositive Power:
|
|
10.
|
Shared
Dispositive Power:
|
|
11.
|
Aggregate
Amount Beneficially Owned by Each Reporting
Person:
|
|
12.
|
Check
if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
|
|
13.
|
Percent
of Class Represented by Amount in Row (11):
0%
|
|
14.
|
Type
of Reporting Person (See
Instructions)
|
HC
Schedule
13D
CUSIP No.
67066Y
|
1.
|
Names
of Reporting Persons
|
Bank of
America,
N.A. 94-1687665
|
2.
|
Check
the Appropriate Box if a member of a Group (see
instructions)
|
|
a.
|
_
|
|
b.
|
X
|
|
3.
|
SEC
Use Only
__________________________________________
|
|
4.
|
Source
of Funds (See
Instructions): OO
|
|
5.
|
Check
Box if Disclosure of Legal Proceedings Is Required pursuant to Items 2(d)
or 2(e).
|
|
6.
|
Citizenship
or Place of Organization
|
Delaware
Number of
Shares Beneficially Owned by Each Reporting Person
With:
|
7.
|
Sole
Voting Power:
|
|
8
.
|
Shared
Voting Power:
|
|
9.
|
Sole
Dispositive Power:
|
|
10.
|
Shared
Dispositive Power:
|
|
11.
|
Aggregate
Amount Beneficially Owned by Each Reporting
Person:
|
|
12.
|
Check
if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
|
|
13.
|
Percent
of Class Represented by Amount in Row (11):
0%
|
|
14.
|
Type
of Reporting Person (See
Instructions)
|
BK
__________________________________________________________________
Schedule
13D
CUSIP No.
67066Y
|
1.
|
Names
of Reporting Persons
|
Blue
Ridge Investments,
L.L.C 56-1970824
|
2.
|
Check
the Appropriate Box if a member of a Group (see
instructions)
|
|
a.
|
_
|
|
b.
|
X
|
|
3.
|
SEC
Use Only
__________________________________________
|
|
4.
|
Source
of Funds (See
Instructions): OO
|
|
5.
|
Check
Box if Disclosure of Legal Proceedings Is Required pursuant to Items 2(d)
or 2(e).
|
|
6.
|
Citizenship
or Place of Organization
|
Delaware
Number of
Shares Beneficially Owned by Each Reporting Person
With:
|
7.
|
Sole
Voting Power:
|
|
8.
|
Shared
Voting Power:
|
|
9.
|
Sole
Dispositive Power:
|
|
10.
|
Shared
Dispositive Power:
|
|
11.
|
Aggregate
Amount Beneficially Owned by Each Reporting
Person:
|
|
12.
|
Check
if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
|
|
13.
|
Percent
of Class Represented by Amount in Row
(11): 0%
|
|
14.
|
Type
of Reporting Person (See
Instructions)
|
OO
__________________________________________________________________
Item
1 Security
and Issuer
This
Amendment of the Reporting Persons’ (as defined below) previous statement on
Schedule 13D (this “Amendment”) relates to shares
of auction rate preferred securities (“ARPS”) of Nuveen California
Dividend Advantage Municipal Fund (the “Issuer”). This
Amendment is being filed by the Reporting Persons as a result of the Issuer
redeeming all of the ARPS held by the Reporting Persons on July 27,
2011. The Issuer’s principal executive offices are located at 333 W.
Wacker Drive, Chicago, IL 60606.
All series of ARPS issued by the Issuer
that vote together as a single class are treated as one class. As
closed-end funds that issue auction rate preferred securities do not provide
publicly the amount of such securities outstanding, we established the amount of
such securities outstanding by canvassing the issuers and the managers of the
various auctions for such securities.
Item
2 Identity and
Background
This
Amendment is being filed on behalf of each of the following persons
(collectively, the “Reporting
Persons”):
|
i.
|
Bank
of America Corporation (“BAC”)
|
|
ii.
|
Bank
of America, N.A. (“BANA”)
|
|
iii.
|
Blue
Ridge Investments, L.L.C. (“Blue
Ridge”)
|
This
Amendment relates to the ARPS that were held for the account of BANA, and Blue
Ridge.
The address of the principal business
office of BAC is:
Bank of America Corporate Center
100 North
Tryon Street
Charlotte,
North Carolina 28255
The address of the principal business
office of BANA is:
101 South
Tryon Street
Charlotte,
North Carolina 28255
The address of the principal business
office of Blue Ridge is:
214 North
Tryon Street
Charlotte,
North Carolina 28255
BAC, through its wholly-owned
subsidiaries, BANA, Merrill Lynch, Pierce, Fenner & Smith Incorporated
(“Merrill Lynch”) and
Blue Ridge, is engaged in providing a diverse range of financial services and
products. Since settlements with the Securities and Exchange
Commission and certain state agencies in 2008, Merrill Lynch and certain
predecessors have worked with their customers and issuers of auction rate
preferred securities to provide liquidity to the auction rate preferred
securities market. This has included purchasing auction rate
preferred securities from their customers and working with issuers so that they
are able to redeem outstanding auction rate preferred securities.
Information concerning each executive
officer, director and controlling person (the “Listed Persons”) of the
Reporting Persons is listed on Schedule I attached hereto, and is incorporated
by reference herein. To the knowledge of the Reporting Persons, all
of the Listed Persons are citizens of the United States, other than as otherwise
specified on Schedule I hereto.
Other than as set forth on Schedule II,
during the last five years, none of the Reporting Persons, and to the best
knowledge of the Reporting Persons, none of the Listed Persons, have been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which such person
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws, or finding any violation with respect to such
laws.
|
Item
3
|
Source
and Amount of Funds or Other
Consideration
|
No funds of the Reporting Persons were
used in the redemption of the ARPS.
The Reporting Persons declare that
neither the filing of this Amendment nor anything herein shall be construed as
an admission that such person is, for the purposes of Section 13(d) of the
Exchange Act or any other purpose, (i) acting (or has agreed or is agreeing to
act together with any other person) as a partnership, limited partnership,
syndicate, or other group for the purpose of acquiring, holding or disposing of
securities of the Company or otherwise with respect to the Company or any
securities of the Company or (ii) a member of any group with respect to the
Company or any securities of the Company.
Item
4 Purpose
of the Transaction
On July
27, 2011, the Issuer redeemed all of the ARPS held by the Reporting
Persons. As a result of this redemption, the Reporting Persons no
longer hold any ARPS of the Issuer.
Item
5 Interest
in Securities of the Issuer
(a) - (b) The responses of the
Reporting Persons to Rows (7) through (11) of the cover pages of this Amendment
are incorporated herein by reference.
(c) On July 27, 2011, the Issuer
completed its redemption of all of the ARPS held by the Reporting Persons, at
par value, for a total cash payment of approximately $31,075,000. The
transaction was effected as part of the Issuer’s redemption of its outstanding
ARPS.
(d) No other person is known by the
Reporting Persons to have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, ARPS that may be
deemed to be beneficially owned by the Reporting Persons.
(e) On July 27, 2011, the Issuer
redeemed all of the ARPS held by the Reporting Persons. As a result
of this redemption, the Reporting Persons ceased to be beneficial owners of more
than five percent of the class of securities.
|
Item
6
|
Contracts,
Arrangements, Understandings or Relationships with Respect to Securities
of the Issuer
|
The responses of the Reporting Persons
under Item 4 hereof are incorporated herein by reference.
Item
7 Material
to be Filed as Exhibits
|
Exhibit
|
Description of Exhibit
|
|
|
99.1
|
|
Joint
Filing Agreement.
|
|
99.2
|
Power
of Attorney.
|
|
|
SIGNATURES
|
After reasonable inquiry and to the
best of my knowledge and belief, I certify that the information set forth in
this statement is true, complete and correct.
Date:
August 1, 2011
BANK
OF AMERICA CORPORATION
By: /s/ Michael
Didovic
Name: Michael
Didovic
Title: Attorney-in-fact
BANK
OF AMERICA, N.A.
By: /s/ Michael
Didovic
Name: Michael
Didovic
Title: Director
BLUE
RIDGE INVESTMENTS, L.L.C.
By: /s/ John
Hiebendahl
Name: John
Hiebendahl
|
|
Title: Senior
Vice President and Controller
|
LIST OF
EXHIBITS
|
Exhibit
|
Description of Exhibit
|
|
|
99.1
|
|
Joint
Filing Agreement.
|
|
99.2
|
Power
of Attorney.
|
SCHEDULE
I
EXECUTIVE OFFICERS AND
DIRECTORS OF
REPORTING
PERSONS
SCHEDULE
I
EXECUTIVE OFFICERS AND
DIRECTORS OF
REPORTING
PERSONS
The following sets forth the name and
present principal occupation of each executive officer and director of Bank of
America Corporation. The business address of each of the executive
officers and directors of Bank of America Corporation is Bank of America
Corporate Center, 100 North Tryon Street, Charlotte, North Carolina
28255.
|
Name
|
Position
with Bank of America Corporation
|
Principal
Occupation
|
||
|
Brian
T. Moynihan
|
Chief
Executive Officer, President and Director
|
Chief
Executive Officer and President of Bank of America
Corporation
|
||
|
David
C. Darnell
|
President,
Global Commercial Banking
|
President,
Global Commercial Banking of Bank of America
Corporation
|
||
|
Barbara
J. Desoer
|
President,
Home Loans and Insurance
|
President,
Home Loans and Insurance of Bank of America Corporation
|
||
|
Sallie
L. Krawcheck
|
President,
Global Wealth and Investment Management
|
President,
Global Wealth and Investment Management of Bank of America
Corporation
|
||
|
Terrence
P. Laughlin
|
Legacy
Asset Servicing Executive
|
Legacy
Asset Servicing Executive
|
||
|
Gary
G. Lynch
|
Global
Chief of Legal, Compliance and Regulatory Relations
|
Global
Chief of Legal, Compliance and Regulatory Relations of Bank of America
Corporation
|
||
|
Thomas
K. Montag
|
President,
Global Banking and Markets
|
President,
Global Banking and Markets of Bank of America
Corporation
|
||
|
Joe
L. Price
|
President,
Consumer and Small Business Banking
|
President,
Consumer and Small Business Banking of Bank of America
Corporation
|
||
|
Bruce
R. Thompson
|
Chief
Financial Officer
|
Chief
Financial Officer of Bank of America Corporation
|
||
|
Edward
P. O’Keefe
|
General
Counsel
|
General
Counsel of Bank of America Corporation
|
||
|
Paula
Ann Dominick
|
Interim
Chief Risk Officer
|
Interim
Chief Risk Officer of Bank of America Corporation
|
||
|
Mukesh
D. Ambani1
|
Director
|
Chairman
and Managing Director of Reliance Industries Ltd.
|
||
|
Susan
S. Bies
|
Director
|
Former
Member, Board of Governors of the Federal Reserve
System
|
||
|
Frank
P. Bramble, Sr.
|
Director
|
Former
Executive Officer, MBNA Corporation
|
||
|
Virgis
W. Colbert
|
Director
|
Senior
Advisor, MillerCoors Company
|
||
|
Charles
K. Gifford
|
Director
|
Former
Chairman of Bank of America Corporation
|
||
|
Charles
O. Holliday, Jr.
|
Chairman
of the Board
|
Chairman
of the Board of Bank of America Corporation
|
||
|
D.
Paul Jones, Jr.
|
Director
|
Former
Chairman, Chief Executive Officer and President, Compass Bancshares,
Inc.
|
||
|
Monica
C. Lozano
|
Director
|
Chief
Executive Officer of ImpreMedia, LLC
|
||
|
Thomas
J. May
|
Director
|
Chairman,
President and Chief Executive Officer of NSTAR
|
||
|
Donald
E. Powell
|
Director
|
Former
Chairman, Federal Deposit Insurance Corporation
|
||
|
Charles
O. Rossotti
|
Director
|
Senior
Advisor, The Carlyle Group
|
||
|
Robert
W. Scully
|
Director
|
Former
Member, Office of the Chairman of Morgan
Stanley
|
The
following sets forth the name and present principal occupation of each executive
officer and director of Bank of America, National Association. The
business address of each of the executive officers and directors of Bank of
America, National Association is 101 South Tryon Street, Charlotte, North
Carolina 28255.
|
Name
|
Position
with Bank of America, National Association
|
Principal
Occupation
|
||
|
Brian
T. Moynihan
|
Chief
Executive Officer, President and Director
|
Chief
Executive Officer and President of Bank of America
Corporation
|
||
|
David
C. Darnell
|
President,
Global Commercial Banking
|
President,
Global Commercial Banking of Bank of America
Corporation
|
||
|
Barbara
J. Desoer
|
President,
Home Loans and Insurance
|
President,
Home Loans and Insurance of Bank of America Corporation
|
||
|
Sallie
L. Krawcheck
|
President,
Global Wealth and Investment Management
|
President,
Global Wealth and Investment Management of Bank of America
Corporation
|
||
|
Terrence
P. Laughlin
|
Legacy
Asset Servicing Executive
|
Legacy
Asset Servicing Executive
|
||
|
Gary
G. Lynch
|
Global
Chief of Legal, Compliance and Regulatory Relations
|
Global
Chief of Legal, Compliance and Regulatory Relations of Bank of America
Corporation
|
||
|
Thomas
K. Montag
|
President,
Global Banking and Markets
|
President,
Global Banking and Markets of Bank of America
Corporation
|
||
|
Joe
L. Price
|
President,
Consumer and Small Business Banking
|
President,
Consumer and Small Business Banking of Bank of America
Corporation
|
||
|
Bruce
R. Thompson
|
Chief
Financial Officer
|
Chief
Financial Officer of Bank of America Corporation
|
||
|
Edward
P. O’Keefe
|
General
Counsel
|
General
Counsel of Bank of America Corporation
|
||
|
Paula
Ann Dominick
|
Interim
Chief Risk Officer
|
Interim
Chief Risk Officer of Bank of America Corporation
|
||
|
Susan
S. Bies
|
Director
|
Former
Member, Board of Governors of the Federal Reserve
System
|
||
|
Frank
P. Bramble, Sr.
|
Director
|
Former
Executive Officer, MBNA Corporation
|
||
|
Virgis
W. Colbert
|
Director
|
Senior
Advisor, MillerCoors Company
|
||
|
Charles
K. Gifford
|
Director
|
Former
Chairman of Bank of America Corporation
|
||
|
Charles
O. Holliday, Jr.
|
Chairman
of the Board
|
Chairman
of the Board of Bank of America Corporation
|
||
|
D.
Paul Jones, Jr.
|
Director
|
Former
Chairman, Chief Executive Officer and President, Compass Bancshares,
Inc.
|
||
|
Monica
C. Lozano
|
Director
|
Chief
Executive Officer of ImpreMedia, LLC
|
||
|
Thomas
J. May
|
Director
|
Chairman,
President and Chief Executive Officer of NSTAR
|
||
|
Donald
E. Powell
|
Director
|
Former
Chairman, Federal Deposit Insurance Corporation
|
||
|
Charles
O. Rossotti
|
Director
|
Senior
Advisor, The Carlyle Group
|
||
|
Robert
W. Scully
|
Director
|
Former
Member, Office of the Chairman of Morgan
Stanley
|
The following sets forth the name and
present principal occupation of each executive officer and director of Blue
Ridge Investments, L.L.C. The business address of each of the
executive officers and directors of Blue Ridge Investments, L.L.C. is 214 North
Tryon Street, Charlotte, North Carolina 28255.
|
Name
|
Position
with Blue Ridge Investments, L.L.C.
|
Principal
Occupation
|
||
|
Keith
T. Banks
|
Manager
and Executive Vice President
|
President
US Trust and Co-Head Private Wealth Management of Bank of America,
National Association
|
||
|
Alastair
Borthwick
|
Manager
and Executive Vice President
|
Managing
Director, Global Capital Markets Product Head of Merrill Lynch, Pierce,
Fenner & Smith Incorporated
|
||
|
Lisa
L. Carnoy
|
Executive
Vice President
|
Managing
Director, Head of Capital Markets of Merrill Lynch, Pierce, Fenner &
Smith Incorporated
|
||
|
George
C. Carp
|
Manager
and Executive Vice President
|
Managing
Director, Capital Markets Finance Executive of Bank of America
Corporation
|
||
|
John
C. Cokinos
|
Executive
Vice President
|
Managing
Director, Head of Capital Raising Products of Merrill Lynch, Pierce,
Fenner & Smith Incorporated
|
||
|
Neil
A. Cotty
|
Executive
Vice President
|
Chief
Accounting Officer of Bank of America Corporation
|
||
|
David
J. Flannery
|
Executive
Vice President
|
Managing
Director, Leveraged Finance Product Head of Merrill Lynch, Pierce, Fenner
& Smith Incorporated
|
||
|
Lawrence
Forte
|
Manager
and Executive Vice President
|
Managing
Director, Business Support Executive of Merrill Lynch, Pierce, Fenner
& Smith Incorporated
|
||
|
Graham
C. Goldsmith
|
Executive
Vice President
|
Managing
Director, Head of Distressed of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
|
||
|
Wendy
J. Gorman
|
Executive
Vice President
|
Managing
Director, Risk Management Executive of Bank of America, National
Association
|
||
|
Geoffrey
Greener
|
Executive
Vice President
|
Managing
Director, Global Markets Portfolio Management for Merrill Lynch, Pierce,
Fenner & Smith Incorporated
|
||
|
Mark
D. Linsz
|
Executive
Vice President
|
Managing
Director, Treasurer of Bank of America, National
Association
|
||
|
Walter
J. Muller
|
Executive
Vice President
|
Managing
Director, Chief Investment Officer of Bank of America, National
Association
|
||
|
Gregory
Mulligan2
|
Executive
Vice President
|
Managing
Director, Global Bank Funding Executive of Bank of America, National
Association/London Branch
|
||
|
Alice
Jane Murphy
|
Executive
Vice President
|
Managing
Director, Head of Capital Raising Product for Merrill Lynch, Pierce,
Fenner & Smith Incorporated
|
||
|
Michael
B. Nierenberg
|
Executive
Vice President
|
Managing
Director, Head of Mortgages of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
|
||
|
James
M. Probert
|
Executive
Vice President
|
Managing
Director, Product Head for High Grade Capital Markets-US of Merrill Lynch,
Pierce, Fenner & Smith Incorporated
|
||
|
James
G. Rose, Jr.
|
Executive
Vice President
|
Managing
Director, Product Head - Global Capital Markets of Merrill Lynch, Pierce,
Fenner & Smith Incorporated
|
||
|
Gerhard
Seebacher3
|
Executive
Vice President
|
Managing
Director, Head of Credit Products of Merrill Lynch, Pierce, Fenner &
Smith Incorporated
|
||
|
Richard
S. Seitz
|
Executive
Vice President
|
Managing
Director, Bank Funding Manager of Merrill Lynch, Pierce, Fenner &
Smith Incorporated
|
||
|
Bradley
M. Taylor
|
Executive
Vice President
|
Managing
Director, Bank Funding Manager of Merrill Lynch & Co.,
Inc.
|
||
|
Peter
D. Taube
|
Executive
Vice President
|
Managing
Director, Capital Markets Finance Executive of Bank of America, National
Association
|
SCHEDULE
II
BAC Foreclosure Practice
Order
On April
13, 2011, the Board of Governors of the Federal Reserve System (“Federal Reserve”) issued a
cease and desist consent order (“Consent Order”) against Bank
of America Corporation (“BAC”). The Consent
Order makes no finding on any issues of fact or law or any explicit allegation
concerning BAC. The Consent Order describes a consent order that the
Office of the Comptroller of the Currency (“OCC”) and Bank of America,
N.A. (“BANA”), which is
owned and controlled by BAC, entered into addressing areas of weakness
identified by the OCC in mortgage loan servicing, loss mitigation, foreclosure
activities, and related functions by BANA. The Consent Order also
states that the OCC’s findings raised concerns that BAC did not adequately
assess the potential risks associated with such activities of
BANA. The Consent Order directs the board of directors of BAC to take
appropriate steps to ensure that BANA complies with the OCC consent
order. The Consent Order requires BAC and its institution-affiliated
parties to cease and desist and take specified affirmative action, including
that BAC or its board: (1) take steps to ensure BANA complies with
the OCC order; (2) submit written plans to strengthen the board’s oversight of
risk management, internal audit, and compliance programs concerning certain
mortgage loan servicing, loss mitigation, and foreclosure activities conducted
through BANA; and (3) periodically submit written progress reports detailing the
form and manner of all actions taken to secure compliance with the Consent
Order. BAC submitted an offer of settlement to the Federal
Reserve. In the offer of settlement, BAC agreed to consent to the entry of
the Consent Order, without the Consent Order constituting an admission by BAC or
any of its subsidiaries of any allegation made or implied by the Federal Reserve
in connection with the matter.
BANA Foreclosure Practice
Order
On April
13, 2011, the OCC issued a cease and desist consent order (“Order”) against
BANA. The Order identified certain deficiencies and unsafe or unsound
practices in residential mortgage servicing and in BANA’s initiation and
handling of foreclosure proceedings. The Order finds that in
connection with certain foreclosures of loans in it is residential servicing
portfolio, BANA; (a) filed or caused to be filed in courts executed affidavits
making various assertions that were not based on the affiants’ personal
knowledge or review of relevant books and records; (b) filed or caused to be
filed in courts numerous affidavits or other mortgage-related documents that
were not properly notarized; (c) litigated foreclosure proceedings and initiated
non-judicial foreclosure proceedings without always ensuring that the promissory
note or the mortgage document was properly endorsed or assigned and, if
necessary, in the possession of the appropriate party at the appropriate time;
(d) failed to devote sufficient resources to ensure proper administration of its
foreclosure processes; (e) failed to devote to its foreclosure processes
adequate oversight, internal controls, policies and procedures, compliance risk
management, internal audit, third party management and training; and (f) failed
to sufficiently oversee third-party providers handing foreclosure-related
services. The Order requires that BANA cease and desist such
practices and requires BANA’s Board to maintain a Compliance Committee that is
responsible for monitoring and coordinating BANA’s compliance with the
Order. The Order provides for BANA to: (a) submit a comprehensive
action plan that includes a compliance program, third-party management policies
and procedures, controls and oversight of BANA’s activities with respect to the
Mortgage Electronic Registration System and compliance with MERSCORP’s
membership rules, terms, and conditions; (b) retain an independent consultant to
conduct an independent review of residential foreclosure actions regarding
individual borrowers; (c) plan for operation of management information systems;
(d) submit a plan for effective coordination of communications with borrowers
related to loss mitigation or loan modification and foreclosure activities; (e)
conduct an assessment of BANA’s risks in mortgage servicing operations; and (f)
submit periodic written progress reports detailing the form and manner of all
actions taken to secure compliance with the Order. BANA submitted an
offer of settlement to the OCC. In the offer of settlement, BANA agreed to
consent to the entry of the Order, without admitting or denying any
wrongdoing.
Gail Cahaly, et al. v.
Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill
Lynch”),
Benistar Property Exchange Trust Co., Inc.(“Benistar”), et al. (Massachusetts
Superior Court, Suffolk County, MA)
Plaintiffs
alleged that Merrill Lynch aided and abetted a fraud, violation of a consumer
protection law, and breach of fiduciary duty allegedly perpetrated by Benistar,
a former Merrill Lynch client, in connection with trading in the client's
account. During the proceedings, plaintiff also made allegations that
Merrill Lynch engaged in sanctionable conduct in connection with the discovery
process and the trial. In 2002, following a trial, a jury rendered a
verdict for plaintiffs. Thereafter, the Court granted Merrill Lynch’s
motion to vacate and plaintiffs’ motion for a new trial. On June 25,
2009, following a retrial, the jury found in plaintiffs’ favor. On
January 11, 2011, the Court entered rulings denying plaintiffs’ motion for
sanctions and punitive damages, awarding certain plaintiffs consequential
damages, and awarding attorneys’ fees and costs. On February 7, 2011,
the Court issued final judgment requiring Merrill Lynch to pay $9,669,443.58 in
consequential and compensatory damage plus statutory interest, and $8,700,000 in
attorneys’ fees and costs; but denying plaintiffs’ requests for punitive damages
and sanctions. The client, a co-defendant, filed a notice of appeal
of the Court’s denial of its motion for a new trial on or about January 19,
2011. On or about January 24, 2011, plaintiffs filed a
notice of
appeal of the Court’s denial of their motion for sanctions pursuant to Mass.
Gen. Laws c. 231 § 6G. On March 1, 2011, the plaintiffs filed a
notice of appeal of the Court’s denial of their requests for punitive damages
and sanctions, and the Applicant filed a notice of cross-appeal on March 15,
2011.
BAC Muni Derivative
Settlement
The
Federal Reserve reviewed certain activities related to various types of
anti-competitive activity by certain employees of BAC in conjunction with the
sale of certain derivative financial products to municipalities and non-profit
organizations variously between 1998 and 2003. Following the review, BAC
and the Federal Reserve entered into a Formal Written Agreement on December 6,
2010, to ensure that BAC proactively and appropriately manages its compliance
risk related to certain competitively bid transactions. In addition, BAC agreed
to submit a written plan to strengthen BAC’s compliance risk management program
regarding those same competitively bid transactions, and to promptly implement
that plan once it is approved by the Federal Reserve Bank of
Richmond.
BANA Muni Derivative
Settlement
The OCC
reviewed certain activities related to the participation of certain employees of
BANA in the sale of certain derivative financial products to municipalities and
non-profit organizations, and found information indicating that certain BANA
employees engaged in illegal bidding activity related to the sale of those
derivative financial products variously between 1998 and January 2004.
Following the review, BANA and the OCC entered into a Formal Written Agreement
on December 7, 2010, to ensure that BANA proactively and appropriately manages
its compliance risk related to various competitively bid transactions, including
those related to derivative financial products to municipalities and non-profit
organizations.
In
addition, BANA agreed to do a formal assessment of all business lines that
engage in certain types of competitively bid transactions, to complete a formal
evaluation of the operational policies and procedures applicable to such
businesses to ensure that adequate policies and procedures exist to ensure
compliance with safe and sound banking practices, law, and regulations related
to the competitively bid transactions, and to develop an internal training
program to ensure compliance with all laws and regulations related to
competitively bid transactions. Upon approval by the OCC, BANA must
immediately begin to implement the policies, procedures and programs called for
by the Agreement. Finally, BANA agreed to pay unjust enrichment in the
amount of $9,217,218 to certain counterparties indentified by the
OCC.
Merrill Lynch (as successor
to BAS) Muni Derivative Settlement
On
December 7, 2010, the Securities and Exchange Commission (“SEC”) issued an administrative
and cease-and-desist order (the “Order”) finding that Banc of
America Securities LLC (“BAS”) (which was merged with
and into Merrill Lynch on 11/01/2010) willfully violated Section 15(c)(1)(A) of
the Securities Exchange Act of 1934 when certain employees participated in
improper bidding practices involving the temporary investment of proceeds of
tax-exempt municipal securities in reinvestment products during the period
1998-2002. The Order censured BAS, ordered BAS to cease and desist
from committing or causing such violations and future violations, and ordered
BAS to pay disgorgement plus prejudgment interest in the amount of
$36,096,442.00. BAS consented to the Order without admitting or
denying the SEC’s findings.
Merrill Lynch 529 Plan
AWC
On
November 23, 2010, the Financial Industry Regulatory Authority (“FINRA”) alleged that Merrill
Lynch violated MSRB Rule G-27 in that during the period January 2002 to February
2007, Merrill Lynch required registered representatives to consider potential
state tax benefits offered by a state in which a client resides as a factor when
recommending a client invest in a 529 plan. But Merrill Lynch’s written
supervisory procedures did not require supervisors to document reviews to
determine if registered representatives had in fact considered potential state
tax benefits when recommending a client invest in a 529 plan. As a
result, Merrill Lynch did not have effective procedures relating to documenting
its suitability determinations in connection with the sale of 529
plans. Without admitting or denying the findings, Merrill Lynch
consented to the described sanctions and to the entry of findings; therefore,
Merrill Lynch is censured, fined $500,000 and required within 60 days of
execution of this Acceptance, Waiver and Consent (“AWC”) to distribute a
stand-alone letter acceptable to FINRA to each current customer who resided in a
state that offered 529-related state tax benefits at the time the customer
opened an advisor-sold specific 529 plan account at Merrill Lynch from June 2002
through February 2007; the letter will instruct the customers to call a
designated Merrill Lynch phone number with inquiries, concerns or complaints
regarding their 529 investment. The designated number will be
available for 120 days after which the number will contain a recorded message to
contact Merrill Lynch’s college plan services area. If requested
within 180 days of mailing of the 529 letter, Merrill Lynch will assist in
transferring or rolling-over any customer's investment in the specific plan into
a 529 plan of the customer's choice within his/her home state, regardless of
whether Merrill Lynch currently offers such 529 plan, with Merrill Lynch waiving
any and all client fees, costs in connection with the sale, transfer, or
roll-over of the specific plan; and/or any and all client fees, costs due to
Merrill Lynch in connection with the initial purchase of a 529 plan within the
customer's home state using the proceeds of the specific plan. Merrill Lynch
shall provide FINRA semi-annually or upon FINRA’s request, until December 31,
2011, a report describing each oral/written inquiry, concern or complaint
received through the designated number or any written complaint otherwise
received by Merrill Lynch concerning the specific plan from the 529 letter
recipients, along with a description of how Merrill Lynch addressed or resolved
the inquiries, concerns or complaints of each such customer.
Merrill Lynch (as successor
to BAI) Massachusetts Consent
On
November 17, 2010, the Commonwealth of Massachusetts Securities Division alleged
that two employees of Banc of America Investment Services, Inc. (“BAI”) (which merged with and
into Merrill Lynch on 10/23/2009) sold Fannie Mae and Freddie Mac federal agency
step-up bonds to an investor and that they did not describe the bonds
accurately. The state regulator alleged that BAI failed to supervise
the conduct in violation of M.G.L. C.110a § 204(a)(2)(g). Only BAI
was named as a respondent in the consent order. On November 16,
2010, BAI submitted an offer of settlement, without admitting or denying the
facts and without an adjudication of any issue of law or fact, and consented to
the entry of the consent order. BAI agreed to a fine of $100,000, to
cease and desist, and to an undertaking to retain an independent compliance
consultant and impose heightened supervision on a representative.
Merrill Lynch FINRA UIT
AWC
On August
18, 2010, FINRA alleged that Merrill Lynch violated NASD Rules 2110, 2210,
3010--in that Merrill Lynch failed to establish, maintain and
enforce a supervisory system and written supervisory procedures reasonably
designed to achieve compliance with its obligations to apply sales charge
discounts to all eligible Unit Investment Trust (“UIT”)
purchases. Merrill Lynch relied on its brokers to ensure that
customers received appropriate UIT sales charge discounts, despite the fact that
Merrill Lynch failed to appropriately inform and train brokers and their
supervisors about such discounts. Merrill Lynch’s written supervisory
procedures had little or no information or guidance regarding UIT sales charge
discounts. Once Merrill Lynch established procedures addressing UIT
sales charges discounts, they were inaccurate and
conflicting. Merrill Lynch's written supervisory procedures
incorrectly stated that a discount would not apply when a client liquidates an
existing UIT position and uses the proceeds to purchase a different
UIT. Merrill Lynch’s procedures lacked substantive guidelines,
instructions, policies, or steps for brokers or their supervisors to follow to
determine if a customer's UIT purchase qualified for and received a sales charge
discount. As a result of the defective procedures, Merrill Lynch
failed to provide eligible customers with appropriate discounts on both UIT
rollover and breakpoint purchases. Merrill Lynch failed to identify
and appropriately apply sales charge discounts in transactions reviewed in a
sample of customer purchases in certain top selling UITS. As a
result, Merrill Lynch overcharged customers in this sample approximately
$123,000. Following FINRA's publication of a settlement with another
firm concerning UIT transactions and independent of FINRA's pending inquiry,
Merrill Lynch analyzed its application of sales charge discounts to UIT
transactions. As a result of the review, Merrill Lynch identified
customers that were overcharged when purchasing UITs through Merrill Lynch and
in accordance with the undertakings set forth below, will remediate those
customers more than $2 million in overcharges. Merrill Lynch approved
for distribution inaccurate and misleading UIT sales literature and provided
this UIT presentation for brokers to use with clients. This
presentation was subject to the content standards set forth in NASD Rule 2210(d)
and violated those standards. Without admitting or denying the
findings, Merrill Lynch consented to the described sanctions and to the entry of
findings; therefore, Merrill Lynch is censured, fined $500,000 and agrees to
provide remediation to customers who, during the relevant period, purchased UITs
and qualified for, but did not receive, the applicable sales charge
discount. Within 90 days of the effective date of this AWC, Merrill
Lynch submitted to FINRA a proposed plan of how it will identify and compensate
customers who qualified for, but did not receive, the applicable UIT sales
charge discounts. The date that FINRA notifies Merrill Lynch that it
does not object to the plan shall be called the notice date. In the
event FINRA does object to the plan, Merrill Lynch will have an opportunity to
address FINRA's objections and resubmit the plan within 30 days. A
failure to resubmit to FINRA a plan that is reasonably designed to meet the
specific requirements and general purpose of the undertaking will be a violation
of the terms of the AWC. Merrill Lynch shall complete the remediation
process within 180 days from the notice date. Within 210 days of the
notice date, Merrill Lynch will submit to FINRA a schedule of all customers
identified during Merrill Lynch’s review as not having received an appropriate
sales charge discount. The schedule shall in
clude details of the
qualifying purchases and the appropriate discount and total dollar amounts of
restitution provided to each customer. Also within 210 days from the
notice date, Merrill Lynch will submit to FINRA a report that explains how
Merrill Lynch corrected its UIT systems and procedures and the results of
Merrill Lynch’s implementation of its plan to identify and compensate qualifying
customers including the amounts and manner of all restitution paid.
Merrill Lynch NASDAQ
Settlement
On June
29, 2010, the NASDAQ Stock Market (“NASDAQ”) alleged that Merrill
Lynch violated NASDAQ RULES 2110, 3010 in that Merrill Lynch's
supervisory system and written supervisory procedures were not reasonably
designed to achieve compliance with applicable securities laws and regulations
(including NASD notice to members 04-66) and NASDAQ rules concerning the
prevention of erroneous orders and transactions and frivolous clearly erroneous
transaction complaints. Without admitting or denying the findings,
Merrill Lynch consented to the described sanctions and to the entry of findings;
therefore, Merrill Lynch is censured, fined $10,000 and required to revise its
written supervisory procedures regarding compliance with NASD Notice to Members
04-66 within 30 business days of acceptance of this AWC by the NASDAQ review
council.
BAC ML&Co. Proxy Rule
Settlement
The SEC
alleged that BAC violated the federal proxy rules by failing to disclose
information concerning Merrill Lynch & Co., Inc.’s (“ML&Co.”) known and
estimated losses in the fourth quarter of 2008 prior to the shareholder vote on
December 5, 2008 to approve the merger between the two companies. In
addition, the SEC alleged that Bank of America Corporation (the “Corporation”) violated Section
14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 14a-9
thereunder by failing to disclose in the Corporation’s joint proxy statement
filed on November 3, 2008 the incentive compensation that Merrill Lynch &
Co., Inc. could, in its discretion, award to its employees prior to completion
of its merger with the Corporation. On February 24,
2010, a final judgment (the “Final Judgment”) was entered
by the U.S. District Court for the Southern District of New York in both
matters. Under the terms of the Final Judgment, BAC agreed to pay $1
in disgorgement and a $150 million civil penalty to be distributed to
shareholders as part of the SEC’s Fair Funds Program at a later date in
accordance with further order of the court. In addition, as part of
the Final Judgment, BAC agreed, for a period of three years, to comply with and
maintain certain requirements related to BAC’s corporate governance and
disclosure practices.
Merrill Lynch CBOE Decision
and Order of Offer of Settlement
On April
13, 2010, the Chicago Board of Options Exchange (“CBOE”) censured and fined
Merrill Lynch $150,000. In addition, the BCC ordered an undertaking
requiring Merrill Lynch to provide the Exchange with a certification within
thirty (30) days of the issuance of the decision in this matter that Merrill
Lynch has corrected the systems problems leading to this case, that all
information reported to the Exchange in accordance with Rule 4.13(a) is accurate
and is being submitted on a timely basis, and that respondent immediately notify
the Exchange of any inaccuracies in any reports submitted pursuant to rule
4.13(a). During all relevant periods herein, Exchange members were
required to submit to the large options position report all customer positions,
which numbered 200 contracts or more in any single option class listed on the
Exchange on the same side of the market along with their customer's name,
address, and social security number or tax identification
number. Merrill Lynch failed to properly submit all required account
information for approximately 1,346 accounts to the large options position
report. (CBOE Rule 4.13(a) - reports related to position limits.)
Merrill Lynch Client
Associate Registration Settlement
In
September 2009, Merrill Lynch reached agreements in principle and final
administrative settlements with the Texas State Securities Board and various
state securities regulators relating to the state registration of sales
assistants known as Client Associates. Without admitting or denying
wrongdoing, Merrill Lynch agreed to certain undertakings and regulatory
sanctions including reprimand or censure, agreement to cease and desist sales of
securities through persons not registered with the states, payments of fines,
penalties and other monetary sanctions (including past registration fees) of
$26,563,094.50 to be divided amongst the 50 states, the District of Columbia,
Puerto Rico, and the U.S. Virgin Islands, and payment of $25,000 to the North
American Securities Administrators Association.
Merrill Lynch, BAI and BAS
Auction Rate Securities Settlements
In August
2008, Merrill Lynch, BAS and BAI each reached certain agreements in
principal and final settlements with the Office of the New York State Attorney
General, the Massachusetts Securities Division, various state securities
regulators, and the staff of the SEC (the “ARS Settlements”) relating to
auction rate securities (“ARS”). As the result of
the mergers of BAI with and into Merrill Lynch on October 23, 2009 and BAS with
and into Merrill Lynch on November 1, 2010, Merrill Lynch assumed the
liabilities of BAI and BAS in this matter. Without admitting or denying
wrongdoing, each of the aforementioned entities has agreed to, pursuant to the
terms of each settlement to which it is a party, among others, repurchase ARS at
par value (plus any accrued but unpaid interest or dividends) from certain
eligible customers, use best efforts to provide liquidity solutions for
institutional holders of ARS, participate in a special arbitration process to
the extent that eligible customers believe they have a claim for consequential
damages, refund certain refinancing fees related to ARS, pay a civil money
penalty and compensate other eligible customers who purchased ARS and sold them
at a loss. Each of Merrill Lynch, BAS and BAI has substantially completed
the purchase of those ARS. BAI and BAS also agreed to pay a total civil
penalty of $50,000,000 that will be distributed among the states and U.S.
territories that enter into administrative or civil consent orders related to
ARS. Merrill Lynch agreed to pay a $125,000,000.00 civil penalty that will
be distributed similarly.
BAI Representative
Supervision Settlement
On
October 22, 2009, the SEC alleged that BAI failed reasonably to supervise a
former registered representative who converted certain customer funds, with a
view to preventing and detecting violations of Federal securities laws, as
required under Section 15(B)(4)(E) of the Securities Exchange Act of 1934 (the
“Exchange
Act”). Without admitting or denying the allegations, BAI
agreed to enter into a settlement with the SEC, paid a civil money penalty in
the amount of $150,000, and to comply with certain undertakings. Such
undertakings include retaining an independent consultant to review and evaluate
the effectiveness of BAI's supervisory and compliance systems, policies, and
procedures concerning the following: (1) review of customer accounts and
securities transactions; and (2) periodic compliance inspections. BAI has
undertaken to adopt, implement, and maintain all policies, procedures, and
practices recommended by the independent consultant. Notwithstanding the
settlement with the SEC, BAI has identified the customers whose funds were
converted by the former BAI registered representative, and has reimbursed them
in full.
Merrill Lynch Squawk Box
Settlement
On March
11, 2009, without admitting or denying the SEC’s findings, Merrill Lynch
consented to the entry of an administrative SEC order that (1) finds violations
of Section 15(f) of the Exchange Act and Section 204A of the Investment Advisers
Act of 1940 (the “Advisers
Act”) for allegedly failing to maintain written policies and procedures
reasonably designed to prevent the misuse of customer order information, (2)
requires that Merrill Lynch cease and desist from committing or causing any
future violations of the provisions charged, (3) censures Merrill Lynch, (4)
imposes a $7,000,000 civil money penalty and (5) requires Merrill Lynch to
comply with certain undertakings.
Merrill Lynch Consulting
Services Settlement
On
January 30, 2009, Merrill Lynch, without admitting or denying any findings of
misconduct by the SEC, consented to the entry of an administrative order by the
SEC (the “Order”) that
(i) finds that Merrill Lynch violated Advisers Act Sections 204 and 206(2), and
Rule 204-2(a)(14) thereunder; (ii) requires that Merrill Lynch cease and desist
from committing or causing any violation or further violations of the provisions
charged; (iii) censures Merrill Lynch pursuant to Advisers Act Section 203(e);
and (iv) requires Merrill Lynch to pay a civil money penalty of $1
million. The Order finds that Merrill Lynch, through its pension
consulting services advisory program, breached its fiduciary duty to certain
current and prospective pension fund clients by misrepresenting and omitting to
disclose material information.
MLPF&S FINRA OATS/TRACE
AWC
On
September 24, 2008, FINRA alleged that Merrill Lynch violated SEC Rules 10B-10,
17A-3, 17A-4, 200(G) of Regulation SHO, NASD Rules 2110, 2320, 3010, 3110, 4632,
4632(a), 4632(a)(7)[formerly 6420(a)(8)], 6130, 6130(d), 6230(c)(6), 6230(e),
6620, 6620(f), 6955(a), Interpretative Material 2110-2, and MSRB Rule G-14 in
that Merrill Lynch, in transactions for or with a customer, failed to use
reasonable diligence to ascertain the best interdealer market and failed to buy
or sell in such market so that the resultant price to its customers was as
favorable as possible under prevailing market conditions; reported to the Order
Audit Trail System (“OATS”) route or combined
order/route reports that OATS was unable to li
nk to the related order routed to
SUPERMONTAGE or SELECTNET or corresponding new order submitted by the
destination member firm due to inaccurate, incomplete or improperly formatted
data; submitted to OATS Reportable Order Events (“ROES”) that were rejected by
OATS for context or syntax errors and failed to repair them; failed to report to
the Trade Reporting and Compliance Engine (“TRACE”) the correct
contra-party identifier for transactions in TRACE-eligible securities; reported
to trace transactions in TRACE-eligible securities it was not required to
report; failed to contemporaneously or partially execute customer limit orders
in NASDAQ securities after it traded each subject security for its own
market-making account at a price that would have satisfied each customer's limit
order; failed to report, or timely report, to the NASDAQ Market
Center (“NMC”) the
cancellations of trades previously submitted to NASDAQ; incorrectly reported to
the NMC the 2nd leg of "riskless" principal transactions in designated
securities and incorrectly designated the capacity as "principal;" failed to
report to the NMC the correct symbol indicating whether it executed transactions
in reportable securities in a principal or agency capacity; failed to report to
the NMC or the FINRA/NASDAQ Trade Reporting Facility (“FNTRF”) the correct symbol
indicating whether transactions were buy, sell, sell short, sell short exempt or
cross for transactions in reportable securities; failed to report to the NMC the
correct execution time for transactions in reportable
securities. Merrill Lynch failed to report, or timely report to the
OTC reporting facility the cancellations of trades previously submitted;
transmitted to OATS reports that contained inaccurate, incomplete or improperly
formatted data; failed to provide written notification disclosing to
its customers that transactions were executed at an average price; failed to
provide written notification disclosing its executing capacity in a
transaction. Merrill Lynch failed to preserve for a period of not
less than 3 years, the first 2 in an accessible place, brokerage order
memoranda; in short sale order transactions, failed to properly mark the orders
as short; incorrectly designated as ".W" to the FNTRF last sale reports of
designated securities transactions; incorrectly reported to the FNTRF the 2nd
leg of "riskless" principal transactions in designated securities because it
incorrectly designated the capacity as "principal;" failed to report to the
FNTRF last sale reports of transactions in designated securities; incorrectly
designated as ".PRP" one last sale report; failed to report the cancellation of
one trade previously submitted; failed to report the correct time of execution
of a last sale report; reported the cancellation of one last sale report it was
not required to; and failed to report to the FNTRF the correct symbol indicating
whether it executed transactions in reportable securities in a principal or
agency capacity. Merrill Lynch’s supervisory system did not provide
for supervision designed to achieve compliance re: TRACE, quality of markets,
transaction reporting, short sales, OATS, etc. Without admitting or
denying the findings, Merrill Lynch consented to the described sanctions and to
the entry of findings; therefore, Merrill Lynch was censured, fined $242,500,
and ordered to pay $11,358.65, plus interest, in restitution. A
registered principal of Merrill Lynch shall submit satisfactory proof of payment
of the restitution, or of reasonable and documented efforts undertaken to effect
restitution no later than 120 days after acceptance of this AWC. Any
undistributed restitution and interest shall be forwarded to the appropriate
escheat, unclaimed property or abandoned property fund for the state in which
the customer last resided. Merrill Lynch shall revise its written
supervisory procedures regarding TRACE, quality of markets, OATS receiving
inter-firm route matching statistics, transaction reporting, short sales, short
sales bid and tick test compliance, OATS clock synchronization, safe harbor
compliance, recordkeeping, limit order protection, the one percent rule,
three-quote rule, etc. within 30 business days of acceptance of this AWC by the
NAC. Within 90 days of acceptance of this AWC, Merrill Lynch’s
Compliance Department and trading desks will develop a written plan to improve
its compliance in trade reporting, OATS reporting and best execution over the 12
months following acceptance of this AWC; identify individuals responsible for
overseeing supervision in these areas; and identify the resources needed to
improve its compliance. At the conclusion of the 12 months, Merrill
Lynch's Chief Compliance Officer or designee and one other registered principal
from one of the trading desks shall meet with FINRA representatives to describe
Merrill Lynch's progress in these areas.
BAI Maryland Supervision
Settlement
On May
21, 2008, the Maryland Securities Commissioner found that BAI failed to
reasonably supervise two agents who misappropriated monies from customers within
the meaning of Section 11-412(a)(10) of the Maryland Securities
Act. Pursuant to a consent order, BAI agreed to pay a $10,000 fine,
cease and desist from further violations, and incorporate certain remedial
measures into supervisory program.
BAI Wrap Fee Program
Settlement
On May 1,
2008, without admitting or denying the SEC’s finding, Columbia Management
Advisors, LLC (now know as BofA Advisors, LLC) consented to the entry of an
order that found violations of Sections 17(a)(2) and 17(a)(3) of the Securities
Act of 1933, Sections 206(2), 206(4) and 207 of the Advisers Act and Advisers
Act Rule 206(4)-1(a)(5) in connection with BAI’s wrap fee program, the adequacy
of disclosures to customers regarding the program and Columbia Management
Advisors’ receipt of additional management fees as a result
thereof. The SEC order provides that (i) BAI and Columbia
Management Advisors cease and desist from committing or causing any future
violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933,
Sections 206(2), 206(4), and 207 of the Advisers Act, and Rule 206(4)-1(a)(5)
promulgated thereunder; (ii) BAI pay $3,310,206 in disgorgement, $793,773 in
prejudgment interest, and $2,000,000 in civil monetary penalty; (iii) Columbia
Management Advisors pay $2,143,273 in disgorgement, $516,382 in prejudgment
interest, and $1,000,000 in civil monetary penalties; (iv) censures BAI pursuant
to Section 15(b)(4) of the Securities Exchange Act of 1934 and censures BAI and
Columbia Management Advisors pursuant to Section 203(e) of the Advisers Act; and
(v) requests that BAI comply with certain undertakings. The SEC order
provides that: (1) within 15 days, BAI place and maintain on its website for at
least 18 months disclosures respecting the manner of selecting funds for any
discretionary program and identifying any funds affiliated with BAI or Columbia
Management Advisors that are included in the program and aggregate percentage of
affiliate funds included in such program; (2) within 15 days, BAI place a
summary of the order on its website with a hyperlink to the order and maintain
such summary and hyperlink for at least 18 months; (3) on at least a quarterly
basis and continuing for at least 18 months from the date of the statement in
which it is first included, BAI shall send a periodic statement or report to
each discretionary mutual fund wrap fee client to specifically identify all
funds or fund families advised by any affiliate of BAI; (4) within 90 days, BAI
shall complete a comprehensive review of (i) whether the method of selecting
mutual funds to be included in any discretionary program advised by BAI is
adequately disclosed; (ii) the adequacy of disclosures respecting and
discretionary program advised by BAI; and (iii) the adequacy of the policies and
procedures respecting BAI recommendations to mutual fund wrap clients. upon
completion of the review outlined in (4) above, BAI shall forward a description
of any deficiencies found during the review and the manner in which it plans to
remediate any deficiencies to the SEC. BAI shall then implement remedial actions
to address any deficiencies found in the review within 120 days.
Merrill Lynch FINRA NAV
AWC
On
February 28, 2008, FINRA alleged that from January 1, 2002 through December 31,
2004, Merrill Lynch failed to establish, maintain and enforce a supervisory
system and procedures reasonably designed to: (i) identify certain opportunities
for investors to purchase mutual funds at net asset value ("NAV") under NAV transfer
programs, and (ii) provide eligible investors with the benefit of available NAV
transfer programs. Without admitting or denying the findings, Merrill
Lynch consented to the described sanctions and to the entry of findings;
therefore, Merrill Lynch was censured, fined $250,000.00 and must comply with
the following undertakings: Merrill Lynch will provide remediation to
customers who, during the period January 1, 2002 through notice of acceptance of
this AWC, and qualified for, but did not receive, the benefit of an NAV transfer
program. Merrill Lynch will provide remediation in accordance with a
methodology not unacceptable to FINRA staff (the "Remediation
Methodology"). The Remediation Methodology will be provided in
writing to FINRA staff prior to retaining the third party
examiner. Within 60 days from the date of the notice of acceptance of
this AWC, retain a third party examiner to assess Merrill Lynch's remediation
and provide a report to FINRA staff. Within 90 days from the notice
of acceptance of this AWC, Merrill Lynch shall submit to FINRA for review a
sample letter notifying clients of remediation payments. The letter
shall not be unacceptable to FINRA. Within 120 days from the notice
of acceptance of this AWC, Merrill Lynch shall designate and train staff (the
"Response Team") to field and respond to client inquiries in connection with
this AWC and the remediation processes pursuant to this AWC. Within
300 days from the notice of acceptance of this AWC, Merrill Lynch shall complete
the remediation process. Within 360 days from the notice of acceptance of this
AWC, Merrill Lynch shall file a report with FINRA, and simultaneously with the
third party examiner. Within 420 days after the date of notice of
acceptance of this AWC, Merrill Lynch shall require its third party examiner to
submit a written final report to Merrill Lynch, and to FINRA.
BAS NYSE ETFS
Decision
On
October 4, 2007, without admitting or denying guilt, BAS consented to findings
that it violated: 1. NYSE Rule 401(A) by failing to adhere to the
principals of good business practice in that BAS failed to ensure the delivery
of prospectuses in connection with certain sales of registered securities in
violation of Section 5(B)(2) of the Securities Act of 1933; 2. NYSE Rule 1100(B)
by failing to deliver product descriptions to customers that purchased Exchange
traded funds ("ETFs");
and 3. NYSE Rule 342 by failing to provide for, establish and maintain
appropriate procedures of supervision and control including a system of
follow-up and review, with respect to its operational and technological
activities relating to the delivery of product descriptions and prospectuses
with respect to ETF shares and an offering of a certain equity
security. BAS stipulated to the following sanctions: The
imposition by the NYSE of : 1. Censure; 2. A fine in the amount of $375,000; and
3. An undertaking to provide enforcement with a written certification that its
current policies and procedures, including written supervisory and operational
policies and procedures, regarding the delivery of prospectuses and product
descriptions are reasonably designed to ensure compliance with the Federal
securities laws and NYSE rules applicable to the delivery of prospectuses and
product descriptions. BAS provided the NYSE with this written
certification within 90 days from the date the hearing panel made the decision
in this matter final.
BAS NASD OATS
AWC
On May
29, 2007, the NASD alleged that BAS transmitted to OATS execution reports that
contained inaccurate, incomplete or improperly formatted data so that the OATS
system was unable to link the execution reports to the related trade reports in
an NASD trade reporting system; erroneously reported to OATS execution codes
with the exception code of "R" for riskless principal trades it reported under
the alternative approach; failed to ROES that were r
ejected by OATS for context
and syntax errors and were repairable; submitted to OATS route or combined
order/route reports that the OATS system was unable to link to the related order
routed to the NASDAQ exchange or to the corresponding new order submitted by the
destination member firm due to inaccurate, incomplete or improperly formatted
data; failed, within 90 seconds after execution, to transmit to the trade
reporting facility last sale reports of transactions in designated securities;
failed, within 90 seconds, to transmit to the OTC reporting facility last sale
reports of transactions in OTC equity securities; reported last sale reports of
transactions in designated securities to the trade reporting facility it was not
required to report; failed to report to TRACE the correct contra-party's
identifier for transactions in TRACE-eligible securities; BAS’s supervisory
system did not provide for supervision reasonably designed to achieve compliance
with applicable securities laws, regulations and NASD rules concerning TRACE
reporting, order handling and soft dollar accounts and trading; and transmitted
to OATS reports that contained inaccurate, incomplete or improperly formatted
data. Without admitting or denying the findings, BAS consented to the
described sanctions and to the entry of findings; therefore, BAS is censured,
fined $60,000 and required to revise BAS’s written supervisory procedures
concerning TRACE reporting, order handling and soft dollar accounts and trading
within 30 business days of acceptance of this AWC by the NAC.
BAS NASD ACT
Settlement
On March
12, 2007, the NASD alleged that BAS failed to accept or decline in the automated
confirmation transaction system (“ACT”) transactions in eligible
securities within 20 minutes after execution. The findings stated
that BAS failed, within 90 seconds after execution, to transmit through ACT last
sale reports of transactions in NASDAQ National Market (“NNM”), NASDAQ SMALLCAP (“SC”) securities and OTC equity
securities. The findings also stated that BAS failed to enforce its written
supervisory procedures for trade reporting and failed to designate as ".T"
through ACT last sale reports of transactions in OTC equity securities executed
outside normal market hours. The findings also included that BAS transmitted to
OATS reports that contained inaccurate, incomplete or improperly formatted data,
effected short sales in certain securities for BAS's proprietary account and
failed to make/annotate an affirmative determination that BAS could borrow the
securities or otherwise provide for delivery of the securities by settlement
date. The NASD found that BAS executed short sale orders and failed
to properly mark the order tickets as short for those orders; failed to provide
written notification disclosing to its customers its correct capacity in the
transaction, that the transaction was executed at an average price and that it
was a market maker. The NASD also found that BAS failed to report to
ACT the correct symbol indicating whether the transaction was a buy, sell, sell
short, sell short exempt or cross for transactions in eligible
securities. In addition, the NASD determined that BAS's supervisory
system did not provide for supervision reasonably designed to achieve compliance
with respect to the applicable securities laws, regulations and NASD rules
concerning registration, SEC Rule 11AC1-6, short sales, bid test and books and
records. Without admitting or denying the findings, BAS consented to
the described sanctions and to the entry of findings, therefore, BAS was
censured, fined $56,500 and required to revise its written supervisory
procedures and supervisory enforcement with respect to registrations, SEC Rule
11AC1-6, short sales, bid test and books and records.
BAS Research
Settlement
On March
14, 2007, neither admitting nor denying the findings, BAS entered into an Offer
of Settlement with the SEC to settle allegations that BAS violated sections
15(c) and 15 (f) of the Exchange Act and Rule 15c1-2(a) promulgated thereunder.
The SEC's Order finds that, during the period of January 1999 through December
2001, BAS violated the antifraud and internal control provisions of the federal
securities laws in connection with BAS' issuance of research. The SEC
Order provides that BAS is censured; BAS shall cease and desist from committing
or causing any future violations of Sections 15(c) and 15(f) of the Exchange Act
and Rule 15c1-2(a) promulgated thereunder; BAS shall pay a civil money penalty
of $6 million for violations of Section 15(f) of the Exchange Act and $10
million in disgorgement plus a civil money penalty of $10 million for its
violations of Section 15(c) of the Exchange Act; and BAS shall comply with
certain undertakings. The SEC Order provides that; (1) within 30
days, BAS shall retain a qualified independent consultant to conduct a
comprehensive review of BAS' policies, practices and procedures to prevent the
misuse of material nonpublic information concerning BAS research, to determine
the adequacy of such policies, practices and procedures under Section 15(f) of
the Exchange Act and to prepare a report reviewing the adequacy of BAS' current
policies, practices, and procedures and making recommendations regarding how BAS
should modify or supplement the policies, practices, and procedures to prevent
the misuse of material nonpublic information in compliance with Section 15(f);
(2) within 120 days of BAS' receipt of said consultant's report, BAS shall adopt
and implement all recommendations set forth in the consultant's report; (3)
within 30 days, BAS must undertake to conduct a review of the implementation and
effectiveness of BAS’ policies and procedures relating to its equity research
and investment banking operations to ensure compliance with all terms of the
Order and provide a written report to the SEC setting forth its findings and its
recommendations regarding any revisions or improvements to BAS's policies and
procedures necessary or appropriate to ensure compliance with all terms of the
Order; and (4) within 30 days of the report outlined in (3) above, BAS must
undertake to adopt and implement all recommendations of the report and certify
that BAS's policies and procedures relating to equity research and investment
banking operations ensure compliance with all terms of the Order.
Merrill Lynch Virginia
Settlement
On
October 24, 2006, the Virginia Division of Securities (the “Division”) alleged that
Merrill Lynch: (1) violated Securities Rule 21 VAC 5-20-260 B by
failing to exercise diligent supervision over the securities activities of all
of its agents, including instances of over-burdened branch management; (2)
violated Securities Rule 21 VAC 5-20-280 A 3, by failing to maintain all
information known about customers contained in the FFRS and Merrill Lynch's
internal computer designation for client account profiles ("KDIS"), including the failure
to reconcile such information between the FFRS and the KDI system, and by
failing to establish a supervisory review to ensure that appropriate disclosures
were documented when it offered only the State of Maine 529 plan without
comparison of this plan to Virginia's in-state 529 plan; and (3) violated
Securities Rule 21 VAC 5-20-280 A 12 by failing to consistently notify certain
clients with MLUA accounts of the difference between the fees they had incurred
in the MLUA program and the standard transaction charges they would have been
charged had the account not been in MLUA. Merrill Lynch neither
admitted, nor denied the allegations, but Merrill Lynch admitted to the
Division’s jurisdiction over the matter and agreed to and has changed its
policies and procedures to correct the criticisms noted. Merrill
Lynch also has fulfilled its obligations for SEC-2003-00041 and Merrill Lynch
has paid $75,000 to the Division to defray the cost of the
investigation.
BAC AML
Settlement
On
September 28, 2006, BAC entered into a civil settlement agreement with the New
York County District Attorney. The agreement provides that, from about 2002 to
2004, BAC had deficiencies in certain internal anti-money laundering controls
and failed to react appropriately to the risk presented by certain South
American money services business customers who moved funds illegally through
BAC. The agreement requires BAC to make a total payment of $7.5 million, to
cooperate with the New York County District Attorney in ongoing investigations
and to abide by anti-money laundering changes recommended by BAC’s
regulators.
BAS NASD MSRB Rule Violation
Settlement
On August
17, 2006, BAS filed eight MSRB Forms G-36(OS) and (ARD) in an untimely manner in
that they were filed from one to five days late. BAS also failed to
establish and maintain a supervisory system reasonably designed to achieve
compliance with the filing requirements of MSRB Rule G-36. Without
admitting or denying the findings, BAS consented to sanctions and to the entry
of findings; therefore, BAS is censured, fined $13,000, and ordered to certify
in writing to the NASD its compliance with the filing requirements of MSRB Rule
G-36, on a quarterly basis for a period of one year, commencing with the third
quarter of 2006.
BAI NASD TRACE
Settlement
On August
8, 2006, the NASD alleged that BAI (i) failed to comply with TRACE reporting
requirements from January 1, 2004 through March 31, 2004 by not reporting to
TRACE certain transactions within 45 minutes of execution and by reporting to
TRACE certain transactions that it was not required to report, and (ii) failed
to have a supervisory system reasonably designed to achieve compliance with the
securities laws, regulations and NASD rules concerning accurate TRACE
reporting. The NASD asserted that such purported actions violated
NASD Rules 2110, 3010, 6230(A) and 6230(E). Without admitting or
denying the allegations, BAI consented to a censure, a fine of $17,500 and an
undertaking to revise its written supervisory procedures regarding accurate
TRACE reporting within 30 business days of acceptance of the AWC.
EXHIBIT
99.1
Joint Filing
Agreement
The
undersigned hereby agree that they are filing this statement jointly pursuant to
Rule 13d-1(k)(1). Each of them is responsible for the timely filing
of such amended Schedule 13D, and for the completeness and accuracy of the
information concerning such person contained therein; but none of them is
responsible for the completeness or accuracy of the information concerning the
other persons making the filing, unless such person knows or has reason to
believe that such information is inaccurate.
In
accordance with Rule 13d-1(k)(1) promulgated under the Securities and Exchange
Act of 1934, as amended, the undersigned hereby agree to the joint filing with
each other on behalf of each of them of such amended Schedule 13D with respect
to the auction rate preferred securities of the Issuer beneficially owned by
each of them. This Joint Filing Agreement shall be included as an
exhibit to such Schedule 13D.
Dated: August
1, 2011
BANK
OF AMERICA CORPORATION
By: /s/ Michael
Didovic
Name: Michael
Didovic
Title: Attorney-in-fact
BANK
OF AMERICA, N.A.
By: /s/ Michael
Didovic
Name: Michael
Didovic
Title: Director
BLUE
RIDGE INVESTMENTS, L.L.C.
By: /s/ John
Hiebendahl
Name: John
Hiebendahl
|
|
Title: Senior
Vice President and Controller
|
EXHIBIT
99.2
LIMITED
POWER OF ATTORNEY
BANK OF AMERICA CORPORATION, a
Delaware corporation (the “Corporation”), does hereby irrevocably make,
constitute, and appoint each of Michael Didovic and Geoff Rusnak as an
attorney-in-fact for the Corporation acting for the Corporation and in the
Corporation’s name, place and stead, for the Corporation’s use and benefit, to
bind the Corporation by his execution of those agreements, forms and documents
related specifically to Section 13 and Section 16 of the Securities Exchange Act
of 1934. Any documents executed by an attorney-in-fact in accordance
with this Limited Power of Attorney shall fully bind and commit the Corporation
and all other parties to such documents may rely upon the execution thereof by
the attorney-in fact as if executed by the Corporation and as the true and
lawful act of the Corporation.
This
Limited Power of Attorney shall automatically terminate as to the authority of
Michael Didovic and Geoff Rusnak upon such attorney-in-fact’s resignation or
termination from or transfer out of the Compliance Department; however; any such
termination shall have no impact on any document or instrument connected
therewith executed by any attorney-in-fact named above for the Corporation prior
to such termination.
IN WITNESS WHEREOF, this Power
of Attorney has been executed and delivered by the Corporation to each
Attorney-in-Fact on this 6th day of January, 2011.
BANK OF AMERICA
CORPORATION
By: /s/ Merrily S.
Gerrish
Merrily S. Gerrish
Associate General Counsel and Assistant Secretary
(CORPORATE
SEAL)