The SEC says it is vigorously pursuing the case against Bank of America, now that Judge Jed Rakoff has rejected its $33 million settlement with the bank.

The issue, basically, is whether Bank of America sent a misleading proxy statement, which included a document that said no Merrill Lynch bonuses would be paid unless noted elsewhere or approved by the bank. They were not noted elsewhere; the document was not included, and the bank had apparently already approved the bonuses. 

The bank had been hiding behind attorney-client privilege, but that seems to be a weakening stance. Congressman Edolphus Towns has railed against it, though there are still some games being played there. And Judge Jed Rakoff is cynical about it.

Fortune says lawyers are now in the spotlight, including the Bank of America team at Wachtell Lipton Rosen & Katz and Merrill's team at Shearman & Sterling. The SEC may yet follow Rakoff's advice to "go after the lawyers" in some form. My bet is still that it will appeal the decision.  

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