Merrill Settles ComplaintJul 20, 2001 | CNNfn
Merrill Lynch & Co., the No. 1 U.S. brokerage house, settled a high-profile arbitration case filed by a former client who claimed losses of a half-million dollars from alleged misleading calls made by technology stock analyst Henry Blodget.
Merrill agreed to pay $400,000 to Debases Kanjilal, a 46-year-old pediatrician, who initiated the civil case with the New York Stock Exchange in March.
Kanjilal contended that Blodget maintained a "buy" rating on the wireless and broadband services provider Infospace Inc., despite the stock's decline, with the motive to enable a lucrative financial deal for Merrill.
Kanjilal said he bought about 4,600 shares of the company and was persuaded by his Merrill broker and Blodget's optimistic recommendation on the stock to keep the shares despite their downward spiral.
"All claims with respect to Henry Blodget as well as Henry Blodget himself were dismissed from this case. We settled to avoid further distraction and expense of protracted litigation," a spokesman for Merrill said.
Blodget was unavailable for comment,
Merrill's settlement could encourage more legal action by investors who snapped up shares of high-flying technology stocks with aggressive "buy" ratings from analysts, only to be badly burned by the sector turmoil in a bearish market.
Earlier this month, Merrill jumped ahead of the brokerage industry watchdogs and rivals on Wall Street by prohibiting its stock research analysts from owning issues that they cover. Merrill's move comes on the heels of growing concerns about the objectivity of analysts' recommendations.