A federal judge in New York has ordered Bank of America and the Securities and Exchange Commission to prepare to go to trial after he rejected a $33 million dollar settlement between them over bonuses at Merrill Lynch. Note: Click here for audio of WFAE's Simone Orendain discussing the case with ATC host Mark Rumsey. Click here for audio of the transcript below. The SEC sued Bank of America in August, alleging the bank hid from shareholders the fact that it approved close to $6 billion in executive bonuses at Merrill Lynch before the two companies merged. Merrill Lynch ended up paying out a total of $3.6 billion in bonuses at the same time that it posted more than $27 billion in losses for the year. That lawsuit didn't go far, the bank did not acknowledge any wrongdoing and agreed to settle with the regulator for $33 million. But US District Judge Jed Rakoff demanded an explanation from both sides. And in the end, what they submitted wasn't enough to convince him to sign off on their settlement. In his ruling, Rakoff says the settlement is unfair, unreasonable and inadequate. He says shareholders have to bear the penalty. Rakoff calls them victims in this case. But he doesn't let the SEC off the hook, either. He says the settlement was "designed to provide the SEC with the façade of enforcement and the management of the bank with a quick resolution of an embarrassing inquiry" Analysts say Rakoff's order is bad for the bank and the regulators. UNC Charlotte Finance Professor Tony place says in recent memory he can't recall when a judge challenged a settlement this way. "In most cases what we would anticipate would be that the judge would simply rubber stamp the fine and the bank would pay the fine quietly, and the issue would go away quietly in a single headline story in the newspaper," he explains. "So what Judge Rakoff is essentially saying is that the import of the case and the significance of the legal argument is of sufficient magnitude here, that the public has a right to know." Cumberland Advisors equity analyst Peter Demirali says the order could signal a shift in the way regulators will be expected to handle cases. "Regulators will have to be tougher to justify their existence, if you will. So I don't think- it's not good for regulators. It's not good for private sector. It's not good for banks. I don't know who it's good for," says Demirali. Bank of America says it disagrees with the judge's ruling. In a statement the bank says it believes the facts demonstrate that proper disclosure was made to shareholders about the Merrill bonuses and it's prepared to prove this in court. Calls to the SEC were not returned.