Merrill Lynch, Henry Blodget, and Market Ethics

The ethical case to be examined in this report is that of Merrill Lynch & Company and the firm's Internet Research Group head analyst, Henry Blodget. During his tenure at Merrill Lynch, Blodget and the Internet Research Group he headed were responsible for providing support to the firm's various functions including research management, investment banking, and stock assessments and recommendations (Gordon, 2002). Blodget and the company have been targeted by New York Attorney General Eliot Spitzer for a thoroughgoing investigation of their practices, with charges levied indicating that the firm created a fraudulent system in which investment banking was given access to research that was more positive than analysts knew to be the case (Sham research, 2002).

Additionally, Blodget and his staff have been accused of aiding Merrill Lynch by over-rating selected offerings or stocks to increase sales, thus placing clients at risk (Sham research, 2002). The ethical issue, therefore, is whether or not blending and/or obfuscating of the resources of a firm such as Merrill Lynch, which functions in disparate areas of the market, is a violation of the spirit and the letter of the law and the regulatory environment surrounding the financial sectors.

Firms such as Merrill Lynch are supposed to erect a "Chinese Wall" between their research and investment banking divisions; research reports produced by an

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