Attempt To Sue Analyst Could Spur More Retail Investors To Follow Suit

Philip Morton, Investors Offshore.com

07 March 2001

An individual investor has attempted to bring a lawsuit against Merrill Lynch and its high-profile Wall Street analyst Henry Blodget, seeking $10 million in punitive damages. But, according to a Financial Times report, institutional investors are not working themselves into a lather just yet as the general opinion is that if analysts are to be blamed for the fall in technology stocks it will be retail investors who will bring on the law suits, not the institutional investors themselves.

'I never heard of anybody successfully suing for somebody being dumb. I don't pay analysts to make judgements; that's my business. I pay analysts for information,' said Colin Ferenbach, manager of New York-based mutual fund, the Haven Fund.

The lawsuit in question was filed by Debases Kanjilal over stocks recommended by Mr Blodget. The premise of Mr Kanjilal's complaint is that he was misled by Mr Blodget over the two stocks which were JDS Uniphase and InfoSpace. He also claims that Mr Blodget did not disclose that Merrill Lynch was employed in an investment banking capacity by Go2Net which was negotiating a buy-out of InfoSpace.

In agreement with Mr Ferenbach is Hank Hermann, chief investment officer of Waddell & Reed, who said it was likely that retail investors will be tempted to bring such cases to court - the traditional institutional investor motto has always been that of 'buyer beware'. He argued: 'I doubt very much whether major institutional investors will jump on the bandwagon. Most of us are fully informed and responsible for our own actions. The idea that Wall Street would mislead us is as much a slam on us as on Wall Street.'

Merrill Lynch described the lawsuit as 'meritless' and claims that Mr Blodget was unaware of Merrill Lynch's work for Go2Net at the time.

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