Caveat investor

3 July 2003 By Hugo Dixon

Wall Street certainly needed a catharsis following the excesses of the bubble years. But investors need to stop viewing themselves as victims and banks as dens of thieves. Lots more regulation would be in nobody’s interest.

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A judge rejected a classaction lawsuit by investors against Merrill Lynch on Thursday. The investors claimed that the US investment bank had failed to disclose conflicts of interest relating to its Global Technology Fund, which has lost an average of 38% of its value each year since 2000. Judge Milton Pollack said there was no evidence that Merrill's actions caused investors to lose money and that the bank was under no obligation to disclose its relationships with companies in the fund. None of the investors proved that they had bought their securities from Merrill.

The judge dismissed two other classaction suits against Merrill on Tuesday by investors claiming that they lost money because of biased research at the bank. Another US judge recently rejected a similar suit against Credit Suisse First Boston, Morgan Stanley and Goldman Sachs.

Earlier this year ten of the biggest investment banks paid $1.4bn to settle an investigation into conflicts of interest headed by New York attorney general Eliot Spitzer.

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