SEC v. Bank of America is surely a case the Commission thought was over. Surly, it is a case that Bank of America thought was over. Both sides now wish it was over. It is not and the questions keep getting harder. In essence, the court’s new order asks why are the shareholders who were supposedly lied to paying for the wrongful conduct of corporate officers secreted behind privilege assertions.

Earlier this week, the SEC filed a brief discussing its view of the case and the reasons for the settlement. The bank filed a similar brief supported by two declarations. The SEC says wrongful acts were committed, but this settlement is the best that can be done because privilege assertions block further inquiry. The bank says nothing was wrong, but a settlement is called for to avoid a dispute with its regulator. It does not comment on privilege. The briefs, discussed here, read as if they were filed in two different cases.

The court has more questions. The SEC’s position that it is unable to determine which individuals are responsible for the wrongful conduct because of privilege assertions by the bank is “puzzling,” according to the court. On the one hand, the proposed $33 million fine to be paid by the bank will in fact “fall directly on the shareholders of Bank of America (and arguably indirectly on U.S. taxpayers).” Those are the same shareholders, the court notes, who were “lied to.”

Yet, the SEC has told Congress and the public in its Statement Concerning Financial Penalties that “‘[w]here shareholders have been victimized . . . the Commission is expected to seek penalties from culpable individual offenders . . .” Here, if the responsible officers all testified that they relied on the advice of counsel, this is “either a flat waiver of privilege or, if privilege is maintained, then entitled to no weight . . .”

If the corporate officers can assert privilege and escape liability because the company refuses to waive privilege, the “the culpability of both the corporate officer and the company counsel will remain beyond scrutiny,” the court’s order states. This is not acceptable. The court would like an explanation from the SEC.

The court also wants an explanation from the bank. If the bank is innocent, as its claims, why did it decided to spend $33 million in shareholder money to end this case. The court wants “specifics,” not the kind of vague statements in the previously filed brief. In addition, “because it is the Bank’s privilege that is at issue, and the Bank’s lawyers who are said to have produced the allegedly false proxy statement, the Bank, like the SEC, is directed in the further submissions . . . to provide its views on the issues raised in this Order.”

Under the court’s order, the answers that the new and rejuvenated SEC enforcement division is suppose to seek may be found: who did it; what sanction should they suffer; and how will this be prevented in the future. Perhaps the victim will be protected instead of being penalized. Bank of America, as a good corporate citizen, should also want the answers to these questions — or its shareholders should understand why they must pay. Now both sides now must answer difficult questions.