Nasdaq Suit Settlement Wins Initial OK

A federal judge on Monday gave preliminary approval to a $910-million settlement of an investor class-action lawsuit alleging that 30 brokerage firms conspired to rig prices on the Nasdaq Stock Market.

At a hearing in federal court in New York, U.S. District Judge Robert Sweet determined that the settlement is fair and reasonable to investors and to the firms. He allowed attorneys in the case to place newspaper advertisements to notify investors of their eligibility to collect money under the settlement.

“It’s been an absolutely Herculean task,” Sweet said of the settlement talks.

The judge is expected to hold another hearing next year before deciding whether to give the settlement final approval. It could be a year and a half more before investors receive any money, David Bershad, a plaintiff attorney, told the judge.

The settlement, reached last week, would increase to $1.01 billion the total amount brokerages will pay to resolve a 1994 price-fixing suit.

Six other brokerages previously agreed to pay a total of $98.9 million to investors.

The suit contended that several million investors lost hundreds of millions of dollars because of collusion among 37 firms between 1989 and 1994. The collusion created an artificial widening of spreads--the difference between the prices at which stocks were bought and sold, the suit alleged. Wider spreads add to dealers’ profits.

The judge said he would rule later on the plaintiffs’ request to expand the suit to include investors who bought or sold Nasdaq stocks as late as July 17, 1996. The current cutoff is May 27, 1994.

The firms that will pay the most in the settlement are Merrill Lynch & Co., which is to pay just under $100 million; Lehman Bros. Inc., which is to pay at least $80 million; Goldman Sachs & Co., to pay $75 million; Salomon Smith Barney Inc., at least $70 million; and Morgan Stanley, Dean Witter, Discover & Co., $65 million.