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Nasdaq settlement OK'd
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December 30, 1997: 6:41 a.m. ET
Funds win big as judge OKs $910 million settlement of price-fixing suit
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NEW YORK (CNNfn) - A federal judge on Monday gave his preliminary approval to a more than $900 million settlement of a price-fixing lawsuit against 30 Wall Street securities firms.
The ruling, issued by U.S. District Judge Robert Sweet, could mean that the firms will have to pay out an estimated $910 million to settle a class-action lawsuit which alleges that they conspired to artificially raise prices for investors trading on the Nasdaq Stock Market.
According to the suit, traders at the 30 firms, including Morgan Stanley, Dean Witter, Discover & Co., Bear Stearns Co. and Merrill Lynch & Co., manipulated the price between which stocks are bought and sold, known as the spread, for their own gain.
The settlement would be the largest of its kind but may not be a windfall for all investors involved in the suit.
Large institutional investors, such as Fidelity Investments, the Vanguard Group and American Century Investments could be the big winners, the New York Times reported Tuesday.
About 75 percent of the money, possibly $750 million, could be parceled out to those firms because of their higher volume of trades.
Smaller investors could be forced to fight for their share of the settlement, the Times report noted. The Times added that it could be problematic for smaller investors since institutional investors have a cadre of lawyers but most smaller investors would have to find their own legal representation, at a cost which would eat into anything gained from the settlement.
Investors in the larger mutual funds may also see little gain because there is no guarantee in the settlement yet that the recovered money be given to the actual investors. Instead, it could be used elsewhere in the mutual fund company.
Attorneys for the plaintiffs gave mixed messages to the Times, with one saying the money would be divided proportionally and the other saying it would be up to the mutual fund companies as to how they would utilize the settlement.
The judge's final decision on the matter is expected sometime next year.
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