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In Second Dismissal, Judge Says Wall Street Conflicts Aren't News

Judge Milton Pollack throws out a suit brought by an investor in a Merrill Lynch tech fund.
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For the second time in as many days, federal Judge Milton Pollack tossed out a suit against

Merrill Lynch

(MER)

, saying the potential for conflicts of interest between analysts and their investment bankers has been "public knowledge for years."

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Pollack, who on Tuesday dismissed a class-action suit alleging Merrill analysts issued too many buy ratings, Wednesday turned back allegations that those ratings inflated the price of stocks in a mutual fund the firm advised.

In his latest ruling, the 96-year-old jurist cited news stories going as far back as 1995 that explained the potential for an investment bank and brokerage to operate at cross purposes.

"The alleged conflict of interest between brokerage firms, investment bankers and research that underlies the entire complaint was a matter of public knowledge for years before the amazing boom of the market initially rewarded those who ignored such caveats," Pollack wrote. "It was also public knowledge that the fund included stocks covered by the Merrill Lynch analysts' research reports."

He also rejected an argument that the fund illegally selected shares in order to curry favor with companies from which it hoped to win investment-banking business. He cited the prospectus in which Merrill said the fund sought long-term capital appreciation by investing in technology companies that were market leaders or likely to become them.

"Plaintiff has not alleged any facts demonstrating that the companies held by the fund did not satisfy these criteria," he wrote.