Merrill Lynch, Pierce, Fenner and Smith Inc., the nation's largest securities firm, has agreed to settle for $1.45 million a five-year-old, $25 million class action suit charging that it advised clients to buy stock in a financially shaky computer firm.
The settlement fee, which still must be approved by a federal court in New York, is to be distributed among the more than 5,000 investors who bought shares of Scientific COntrol Corp. stock from Merrill Lynch in 1968 and 1969. Many customers have claimed the brokerage house failed to diclose that it was making a market in Scientific Control stock and sold shares from its own inventory at an artificially inflated price.
Further, the class action suit charged that Merill Lynch neglected to disclose to customers adverse information on Scientific Control's financial condition.Scientific Control was a computer company based in Dallas which went out of business in November 1969.
The Securities and Exchange commission has an administrative action pending against Merrill Lynch which makes many of the same fraud and manipulation charges contained in the class action. There was no word yesterday on the status of that case.
The proposed $1.45 million is to be divided on a pro rata basis among the shareholders. "We will not know how much cents on a dollar people will be getting back until the claims come in," said R. Alan Stotsenburg, one of the attorneys who represented the stockholders. "But we're very pleased with the settlement."