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The accord, among the largest investor settlements stemming from the recent global financial crisis, was approved by US District Judge Kevin Castel in Manhattan.
Castel called the settlement "fair, reasonable and adequate," and said it culminated an "extraordinarily hard-fought litigation."
Bank of America had agreed to buy Merrill in an all-stock deal initially valued at $50 billion on September 15, 2008, the same day that Lehman Brothers Holdings Inc went bankrupt.
But Merrill ended up losing $15.84 billion in that year's fourth quarter, even as it awarded $3.62 billion of bonuses to employees. Bank of America ultimately obtained a federal bailout, since repaid, to absorb Merrill.
Shareholders including the State Teachers Retirement System of Ohio and the Teachers Retirement System of Texas said Merrill's mounting losses and bonus plans should have been disclosed before investors voted on the merger in December 2008.
The accord with the second-largest US bank was announced in September, and won preliminary court approval in December.
"We are very proud of this result," Max Berger, a lawyer for the plaintiffs, said at the hearing.
Bank of America denied the plaintiffs' allegations, but Chief Executive Brian Moynihan has said the settlement would remove uncertainty for the Charlotte, North Carolina-based bank.
Daniel Kramer, a lawyer for the bank, declined to comment at the hearing. A spokeswoman, Jessica Oppenheim, did not immediately respond to requests for comment after the hearing.
Since buying mortgage lender Countrywide Financial Corp in July 2008 and Merrill six months later, Bank of America has incurred more than $40 billion of extra costs for litigation, writedowns and mortgage buybacks, analysts have said.
The company still faces a variety of litigation over its mortgage operations, which have shrunk significantly in size, and over its underwriting of mortgage securities.
Bank of America is among 17 banks and lenders facing lawsuits by the Federal Housing Finance Agency over losses suffered by Fannie Mae
The FHFA has sued Bank of America over $57.5 billion of securities, more than any other bank, that Fannie Mae and Freddie Mac bought, and which were sponsored or underwritten by Bank of America, Countrywide or Merrill.
Bank of America shares closed up 3 cents at $11.97 on the New York Stock Exchange on Friday.
Castel also awarded three law firms representing the plaintiffs about $160.5 million, including $152.4 million in fees.
"The lawyers did a very fine job of keeping their eye on the job," he said.
The case is: In re: Bank of America Corp Securities, Derivative, and Employee Retirement Income Security Act (ERISA) Litigation, U.S. District Court, Southern District of New York, No. 09-md-02058.
