A Manhattan federal court dismissed lawsuits accusing Goldman Sachs Group, Morgan Stanley and Merrill Lynch of misleading investors with biased research.
In scathing and sarcastic language, U.S. District Judge Milton Pollack made it clear that the blame for the Internet bubble bursting could not be laid at the feet of the brokerage firms.
He also called the investors in the case “high risk speculators” who “hope to twist the federal securities laws not a scheme of cost-free speculators’ insurance.”
In addition, the judge threw out a claim against former Merrill Lynch Internet analyst Henry Boldget.
“We are pleased with the court’s decision,” said a Merrill Lynch spokesman.
The case is the first ruling on the banks’ liability since 10 major Wall Street firms settled charges by government regulators that their research analyst issued conflicted research that was intended to help bankers win business rather than help investors make sound investment decisions.
The dismissal may not be precedent-setting for all individuals looking to hold Wall Street accountable for their losses, however.
“In this class action the class members were not customers of Merrill Lynch and that’s a significant distinction,” says Philip Aidikoff, who represents individuals in suits against brokerage firms. “It’s fraud on the marketplace, which is a much harder case.” Other cases are based on suitability – whether it was suitable to have an individual in a risky stock.