Bank of America settlement effect on short sellers

J

jasonc

Bank of America recently got a 150 million dollar judgement that is to be paid out to shareholders who owned shares up to the Merrill Lynch takeover. If you were short at this time would you then be required to pay that portion of the settlement over a year after? and assuming you had closed your brokers account who would end up paying? Thanks
 
I never shorted the stock but was more wondering if it is possible to be short at a certain time and then be assigned a fee later as a result of litigation. Thanks
 
I'm curious too. Your post said "judgement" but the news said "$150m fine". I'm guessing but presume a "fine" would go to the SEC and not the shareholders.
 
The news i saw said it was to be paid to shareholders on record upto the merger. I wonder though what happens since i could see this situation happen with other companies.
 
You never own stocks that you short. You borrow them. The entity that ultimately collects part or all of the interest on your account is the shareholder. Therefore, Bank of America will give that entity the settlement money. Since they got paid, you won't have to pay them.

At least that is what logic and reason in my head dictates. I'm not sure what the official rules are.
 
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