Merrill told to pay Pennsylvania pair $7.7m

Merrill Lynch has been ordered to pay $7.7m (£5m) to a Pennsylvania couple after it allegedly failed to execute a "sell" order on their investment in a once high-flying internet stock.

The ruling by an arbitration panel in favour of the couple, Douglas and Deborah Millar of Pittsburgh, was one of the largest awards made to a private investor. The couple also claimed they had received poor advice from Merrill Lynch on protecting the value of their investment.

The couple said that on September 1, 2000, they ordered a Merrill Lynch broker to sell half their 200,000 shares in FreeMarkets, an online industrial parts auctioneer. At the time the shares were changing hands for $87, and the sale would have made them $8.7m.

The panel settled on the size of the award by determining a date in December by which the Millars should have realised that the sale had not been executed and calculating how much they had lost. By the end of December, the shares had fallen to $19.

A Merrill Lynch spokesman described the sum as "mind boggling". The bank is appealing the award but arbitration rulings are rarely overturned. The spokesman said: "This award is outrageous and is not based on the facts or law. Very simply, the individuals involved did not give us an order to sell their stock on the date the arbitrators claimed, or at any other time."

In its appeal, Merrill claimed Mr Millar "allegedly expressed... a desire to sell 100,000 shares" of FreeMarkets during a round of golf on September 1, 2000, but that he did not place a sell order. Neither had he mentioned the sale subsequently, it said, despite receiving statements showing he still owned the shares.

To cut costs, private investors agree to take disputes to arbitration rather than court. Such awards are made when brokers control a portfolio and are ruled to have exercised poor judgment in trading shares, but unusually the Millars controlled their own account.