WASHINGTON: The Securities and Exchange Commission said Monday it will go to trial against Bank of America Corp. over billions of dollars in bonuses paid at Merrill Lynch, which the bank acquired in a hastily arranged deal a year ago at the height of the financial crisis.

The SEC said it will "vigorously pursue" its case against Bank of America, opening the possibility that bank executives could also face charges. The bank said it will "vigorously defend" itself.

Monday's announcement by the SEC came after a federal judge last week threw out a $33 million proposed settlement of the case.

The agency has accused BofA of failing to disclose to shareholders that it had authorized Merrill to pay up to $5.8 billion in bonuses to its employees in 2008 even though the investment bank lost $27.6 billion that year.

Separately Monday, Bank of America reached an agreement with the government to exit an arrangement under which public funds might have been used to shoulder losses on risky assets from the Merrill Lynch takeover.

BofA agreed to pay $425 million to government agencies, including the Treasury Department, to get out of the deal, part of a broader effort by the bank to unwind various forms of government support. Charlotte, N.C.-based BofA has been one of the largest benefactors of the government's financial rescue program, receiving a total of $45 billion from the taxpayer-financed $700 billion financial bailout program.

The loss-guarantee arrangement covered $118 billion in risky assets Bank of America acquired in the Merrill Lynch deal. It was never used, but the government has argued that the bank benefited from the promise of protection.

The SEC has been weighing its options in its case involving disclosure of the Merrill bonuses since U.S. District Judge Jed Rakoff called the proposed settlement a breach of "justice and morality," rebuked the agency for not pursuing charges against individual Bank of America executives, and ordered a trial. The SEC could have also tried to renegotiate the accord with Bank of America.

Both the SEC and BofA have defended the earlier settlement proposal as appropriate. However Rakoff had questioned why individual executives at Bank of America weren't charged, and said the settlement unfairly penalized shareholders.

The SEC said in a statement Monday it could seek to bring additional charges if supported by the record of evidence that develops in the trial, meaning that it could seek to charge individual executives.

Bank of America spokesman Scott Silvestri said the bank's position "continues to be that the (disclosure document) met all legal requirements."

"We intend to vigorously defend ourselves in court," Silvestri said in a statement.

BofA had agreed to pay the $33 million settlement without admitting or denying wrongdoing. The bank has said it didn't violate disclosure rules but wanted to avoid litigation with the SEC at a time of market uncertainty.

Rakoff, in his ruling, found that the settlement "suggests a rather cynical relationship between the parties."

"The SEC gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger, the bank's management gets to claim that they have been coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth," he wrote.

The SEC lawsuit comes as Bank of America faces pressure from other fronts. The New York Attorney General's office is doing its own investigation into the Merrill Lynch deal and has been drafting what are likely to be civil fraud charges against top bank executives in the coming weeks.

Also, the bank missed a noon deadline Monday to provide additional information about the Merrill Lynch deal to a congressional committee.

Rep. Edolphus Towns, D-N.Y. and chairman of House Committee on Oversight and Government Reform, told the bank in a letter Friday that it was hiding behind attorney-client privilege, which Congress can refuse to recognize during its investigations. Silvestri declined to comment on whether or not the bank turned over documents by the Monday deadline but said a senior bank executive would meet with Towns on Tuesday to discuss the matter.

BofA also said Monday it had appointed Charles "Chad" Holliday Jr., who is also the board chairman of E.I. du Pont de Nemours and Co., to its board of directors. Seven directors have resigned from Bank of America's board since shareholders replaced the bank's chairman in April.