* Judge says $33 million settlement leaves issues open
* Link to bailout money unclear, judge says
* Bank of America, SEC not available for comment (Adds SEC declining comment, recasts ninth paragraph)
By Jonathan Stempel
NEW YORK, Aug 5 (Reuters) - A U.S. federal judge has refused to approve Monday's settlement between the U.S. Securities and Exchange Commission and Bank of America Corp (BAC.N) related to the acquisition of Merrill Lynch & Co.
In an order on Wednesday, Judge Jed Rakoff of the federal district court in Manhattan said it may be unfair to the public to accept the settlement, which would resolve SEC allegations that Bank of America made false and misleading statements to shareholders about bonuses promised to Merrill employees.
Bank of America had agreed to pay $33 million to settle the civil lawsuit, and along with the SEC had sought the judge's approval for the settlement. Rakoff set a hearing on the matter for the afternoon of August 10.
In its complaint, the SEC had alleged that Bank of America told investors in proxy documents for the Merrill merger that Merrill had agreed it would not award year-end performance bonuses or incentive pay before the merger closed. [ID:nN03521091]
In fact, the SEC alleged that Bank of America had already authorized Merrill to pay up to $5.8 billion of bonuses. Merrill would ultimately pay $3.6 billion, according to regulators.
The merger closed on Jan. 1, 2009. Two weeks later, Bank of America accepted $20 billion from the federal Troubled Asset Relief Program to help it absorb Merrill.
"Despite the public importance of this case, the proposed consent judgment would leave uncertain the truth of the very serious allegations made in the complaint," Rakoff wrote in his two-page order.
"The proposed consent judgment in no way specifies the basis for the $33 million figure or whether any of this money is derived directly or indirectly from the $20 billion in public funds previously advanced to Bank of America as part of its 'bailout,'" the judge added.
SEC spokesman John Nester declined immediate comment. Bank of America did not immediately return requests for comment. The bank is the nation's largest, and is based in Charlotte, North Carolina.
The case is SEC v. Bank of America Corp, U.S. District Court, Southern District of New York (Manhattan), No. 09-6829. (Reporting by Jonathan Stempel; Editing by Valerie Lee)