In a settlement which could open the floodgates for aggrieved investors, Merrill Lynch has paid $400,000 to a client who claims he was misled by a bullish stock call from an analyst for Merrill Lynch, writes Conor O'Clery.

The biggest US brokerage firm agreed to compensate Mr Debases Kanjilal, a 64-year-old pediatrician, after he threatened litigation to recover $500,000 he lost following analyst Henry Blodget's recommendation to invest in InfoSpace, an internet stock.

Henry Blodget, whose salary last year reached $5 million, made his name when he predicted that Amazon.com, the online book-seller, would trade at $400 a share. The stock, then at $240, exceeded that prediction within four weeks.