Merrill analysts to testify
N.Y. law said to force brokerage's bankers to address allegations of misleading customers.
April 10, 2002: 12:45 PM EDT
NEW YORK (CNN/Money) - Merrill Lynch & Co. analysts and their former colleagues will be investigated by the state of New York on allegations that they misled investors by promoting stock in companies that paid them fees, a newspaper reported Wednesday.
Some of the company's analysts, including former investing guru Henry Blodget, will be required under a state securities law, called the Martin Act, to testify about the discrepancies between their positive public reports about certain companies and the comments they made in private, according to a report in the Washington Post.
New York State Attorney General Eliot Spitzer said that e-mail correspondence and other communications obtained by the court show that the analysts were encouraged by other investment bankers employed by Merrill Lynch to mislead investors.
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Merrill Lynch denied the allegations Monday. One person close to the situation said the correspondence was taken out of context, according to the Post.
Executives defended the company Tuesday, stressing the changes Merrill is making, such as tying analysts' stock picks and forecasts to their compensation and evaluating them twice a year, according to a report Wednesday in the New York Times.
Spitzer, who ordered Merrill to disclose all relationships with companies in its research reports earlier this week, said he is also investigating other investment-banking firms, the Post reported.
Congress is also looking into the role the analysts may have played in the Enron case. Some investment firms kept Enron at a "buy" rating even when the company was headed toward bankruptcy. |
