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Brokerage Internet Stock Analysts Sued
The Internet stock picks, estimates and valuations of brokerage firms are under fire.
Congress is holding hearings. The Securities Industry Association is issuing guidelines. And securities lawyers are suing. One arbitration claim alleges that Merrill Lynch's Henry Blodget was unfounded in his research, and failed to disclose conflicts of interest, when he covered Internet company InfoSpace, Inc.
Brokerage firms often have underwriting relationships with the companies that they follow. A "Chinese Wall" must be erected. In the InfoSpace case, the investor lost over $500,000. He claims that Merrill Lynch was biased in its recommendation. The firm failed to disclose that, the day before Blodget reiterated his "buy' rating on the stock, Merrill Lynch investment bankers had met with Go2Net, Inc. to serve as an investment adviser in its $4 billion sale to InfoSpace.
Source: Investment News, June 18, 2001
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