Merrill wins approval of $40.3-million settlement

Merrill Lynch & Co. won approval Wednesday of a $40.3-million settlement of three lawsuits over claims it provided misleading analyst research about Internet companies.

U.S. District Judge John Keenan in New York approved the deal reached after investors appealed the 2003 dismissal of two of the cases. Keenan also awarded $9 million to lawyers who represented almost 400,000 investors who sued.

Investors won 6.25% of the $645 million in damages they sought, which Keenan said was “at the higher end” of the percentage of recoveries in class-action securities suits.

The lawsuits were brought on behalf of shareholders in three Merrill mutual funds: the Internet Strategies Fund, the Global Technology Fund and the Focus Twenty Fund. The firm issued falsely optimistic research reports, and fund prospectuses failed to disclose investments in companies with which Merrill sought banking business, the investors claimed.

Merrill was named in dozens of investor lawsuits in 2002 after the firm issued what the investors said were misleading research reports about Internet companies.

U.S. District Judge Milton Pollack, who died in 2004, dismissed many of the actions, saying the individuals who sued were “high-risk speculators” who wanted to “twist the securities laws into a scheme of cost-free speculators’ insurance.” An appeals court upheld most of the dismissals.

In February 2006, Merrill paid $164 million to settle 12 cases pending in the trial court and 11 on appeal.

Merrill shares gained 80 cents to $93.56.