Wachovia Corp. has agreed to pay a US$37-million penalty to settle charges it violated proxy disclosure and other reporting requirements in connection with its 2001 merger with First Union Corp., the U.S. Securities and Exchange Commission announced Thursday.

Wachovia agreed to the settlement without admitting or denying the allegations in the complaint.

The commission’s complaint alleged that Wachovia and First Union failed to disclose in quarterly reports and in a joint proxy statement-prospectus filed in connection with the merger, that Wachovia intended to purchase US$500 million of First Union common stock during the period when First Union and SunTrust Banks Inc. had launched competing bids for Wachovia.

Wachovia favored First Union’s bid, which offered Wachovia shareholders shares of First Union stock in exchange for their shares. As a result, the SEC claims that Wachovia’s shareholders were unable to evaluate the effect of Wachovia’s purchases of FTU shares before voting on the competing bids. During the course of the SEC staff’s investigation into this matter, Wachovia provided incomplete and untimely document productions and failed to ensure comprehensive and complete responses to requests made and subpoenas issued by the SEC staff, the commission says.

“A company must provide full and accurate disclosure with respect to its activities in the market during a takeover battle and cannot just rely on boiler plate disclosures,” said Thomas Newkirk of the SEC’s Division of Enforcement.

“The substantial penalty here reflects not only the seriousness of the disclosure violations but also the company’s failure to meet its legal obligations in the course of an SEC investigation,” added Stephen Cutler, director of the Enforcement Division at the SEC.