A high-profile Merrill Lynch analyst, who previously announced his resignation from the securities firm, will leave the company under investigation by the New York State attorney general’s office, according to a published report Monday.
The attorney general’s office is investigating whether Merrill Internet analyst Henry Blodget misled clients with stock recommendations and, if so, whether the actions constitute criminal or civil securities fraud charges, according to the Wall Street Journal, citing people familiar with the situation.
Analysts’ recommendations have come under close scrutiny as the Internet bubble collapsed because negative research on a company may hurt a firm’s chance of landing corporate finance work with that same company.
The New York State attorney general’s office confirmed it is investigating analysts’ actions, but did not provide specifics on the Blodget case or whether it is close to bringing charges against him, the Journal reported.
Merrill did not comment on the investigation, but told the paper Blodget “is held in high regard both by our firm and the Wall Street community, which has given his performance as a tech-stock analyst extremely high marks over much of his career in very difficult markets.”
Blodget announced his departure from Merrill in mid-November with an estimated severance package of $5 million, the paper reported.
This is not the first time Blodget’s actions have come under fire. In March of this year, a Merrill client filed an arbitration claim against Blodget, saying his “buy” recommendation and $100 price target on Infospace Inc. was made to keep the company’s financing business, according to the Journal.
The investor said he lost $500,000 following Blodget’s advice, the paper reported. Merrill agreed to pay the client $400,000 in July to settle the case.