Financial management and advisory company Merrill Lynch has settled three class action lawsuits involving 400 investors who claim that the company gave them misleading analyst information regarding Internet companies. The investors are buyers of mutual funds, and they will get about $40 million-6.25% of the original $645 million they had first requested in 2002. The damage amount that will be paid, however, is at the “higher end of the range of reasonableness of recovery in class actions securities litigation,” according to Southern District of New York Judge John F. Keenan who approved the settlement agreement He also says that the class has had an “overwhelmingly positive reaction” to the settlement that was reached.
The three lawsuits are among several class actions that Merrill Lynch has had to deal with since 2002, ever since New York’s then-Attorney General Eliot Spitzer investigated an alleged scheme by Merrill Lynch’s research division to publish misleading or bogus analysis regarding Internet stocks to increase investment banking business. The class action settlements reached earlier this month are the first ones to be approved in connection with the alleged wrongdoing.
Merrill Lynch paid the government $100 million over its alleged actions in 2002. Back then, the company also said it would immediately enact important reforms to further protect its securities research analysts from being influenced unnecessarily by investment banking.
Acts of reform included:
· Severing the compensation connection between analysts and investment banking.
· Barring investment banking from providing input regarding analysts’ compensation.
· Setting up a monitor to make sure that the agreement is followed.
· Establishing a new investment review committee to make sure that all research recommendations meet strict standards and are independent from the analysts and investment banking.
· Reveal in research reports whether it has received or will receive compensation from a covered company over the last 12-month period.
· Issue a statement of contrition and acknowledge that it failed to address conflicts of interest.
Shepherd Smith and Edwards is one of the leading law firms that is committed to helping investors recover their losses due to the wrongful or negligent actions of stockbrokers and their firms. If you are an investor who feels you have been a victim of fraud or negligence on Wall Street, contact Shepherd Smith and Edwards to schedule your free consultation.
Merrill Lynch and Mutual Funds Settle Suits Over Internet Companies, New York Law Journal, February 2, 2007
Spitzer, Merrill Lynch Reach Unprecedented Agreement To Reform Investment Practices, Office of the New York State Attorney General, May 21, 2002