Henry Blodget, whose bullish research calls as an Internet analyst once symbolized the technology-stock mania of the 1990s, will pay $4 million in penalties and be barred from the securities industry for life as part of a settlement scheduled to be announced as early as today, people close to the matter told The Wall Street Journal.
The action stems from an investigation launched by the National Association of Securities Dealers, which earlier this year disclosed that it was preparing to take formal action against Mr. Blodget for some of his research calls during the stock-market bubble. The NASD settlement with Mr. Blodgett is scheduled to be announced today as part of the broad settlement with Wall Street firms over conflicted research.
The NASD examined whether Mr. Blodget, once the star tech analyst at Merrill Lynch & Co. , hyped ratings on Internet stocks to win lucrative investment- banking deals for his firm, while he privately harbored doubts about these very same companies.
Under the terms of the settlement, Mr. Blodget will pay $2 million in fines and $2 million in disgorgement of any ill-gotten gains in addition to a lifetime bar from the brokerage business, these people say. Mr. Blodget will neither admit nor deny wrongdoing in the matter, which will cap an investigation headed by the NASD, as well as the Securities and Exchange Commission and the New York Stock Exchange. Mr. Blodget, contacted by e-mail, had no comment. A NASD spokeswoman had no comment.
The move comes as regulators conclude the broad settlement over allegations that brokerage houses issued overly optimistic research on companies to win investment-banking deals, misleading investors in the process. The settlement includes $1.4 billion in fines, restitution and other payments, as well as guidelines designed to prevent Wall Street firms from issuing compromised research to win lucrative banking deals. The settlement is expected to be announced after the SEC formally votes to approve the measure, which is expected today.