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Merrill Lynch $315 Million Settlement Approved by U.S. Judge

Bank of America Corp. won final approval of a $315 million settlement with investors who sued its Merrill Lynch unit claiming they were misled about mortgage-backed securities and lost money on their investments.

In an order filed publicly today, U.S. District Judge Jed Rakoff ruled that the settlement, reached in December between Merrill Lynch and a class of investors led by the Public Employees’ Retirement System of Mississippi, is “fair, reasonable and adequate.”

Holders of the asset-backed certificates sued Merrill Lynch starting in December 2008 for alleged “false and misleading” prospectus statements related to the securities. The investors claimed Merrill made false statements about the qualifications of mortgage-loan borrowers, property appraisals and debt-to-income ratios of applicants, and that “the registration statement materially misrepresented the credit quality of the mortgage loans underlying the certificates.”

Merrill Lynch, bought by Bank of America in 2009, claimed in settlement papers that the investor losses were the result of “the overall economic downturn, housing-price declines and reduced liquidity.”

Rakoff approved the settlement after holding a fairness hearing in March.

The lead case is Public Employees’ Retirement System of Mississippi v. Merrill Lynch & Co., 08-CV-10841, U.S. District Court, Southern District of New York (Manhattan).

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