The regulator said Merrill failed to tell investors that hedge fund firm Magnetar Capital exercised significant influence in choosing collateral underlying two CDOs in 2006 and 2007.
It also accused Merrill of maintaining inaccurate books and records on a third CDO, Auriga.
The SEC said Magnetar took equity positions in the $1.5bn Octans I CDO and $1.5bn Norma CDO I and hedged them with short positions. It said this meant Magnetar's interests may not have been aligned with those of other investors.
Bank of America did not admit or deny wrongdoing. It bought Merrill on 1 January, 2009. Bank of America spokesman Bill Halldin said the bank was pleased to settle.
Magnetar said it has cooperated with the SEC: “We are pleased that these matters are now behind us.”