Probe of IPO access
Credit Suisse only firm to admit being subject of federal investigation
New York, December 7, 2000: 6:25 p.m. ET (CNNfn) - Federal authorities are investigating investment bank Credit Suisse First Boston for requiring large investors to pay hefty fees for access to initial public offerings, a CSFB spokeswoman said.
CSFB confirmed that the investment bank is the subject of a federal investigation that alleges the bank requires big investors to pony up large commissions in exchange for access to hot IPOs.
The CSFB probe comes amidst a larger federal investigation into whether Wall Street dealers may have sought and obtained larger-than-typical trading commissions in return for giving coveted allocations of IPOs to certain investors, The Wall Street Journal reported Thursday.
So far, CSFB is the only firm to admit it is part of the investigation. CSFB said it had received requests from governmental agencies regarding the allocation of shares. CSFB said it is cooperating fully and that its allocation considerations are "consistent with those employed by others in the industry," the bank said in a statement.
CSFB would not comment further. Spokesmen for Deutsche Bank, U.S. Bancorp Piper Jaffrey, Lehman Brothers and Robertson Stevens told CNNfn those firms are not involved, while sources familiar with the investigation said Goldman Sachs and Merrill Lynch are also not involved.
Morgan Stanley Dean Witter, Chase Hambrecht & Quist, Salomon Smith Barney and SG Cowen could not be reached for comment.
Access to hot IPOs
The Journal article contended that some of the arrangements established by underwriters could have included specific formulas tied to the investors' profits on the offerings. Many of the offerings increased by double or more in their first day of trading during an IPO mania that began in late 1998. The U.S. Attorney's office in Manhattan has called a federal grand jury to consider evidence, while both the U.S. Attorney and the SEC have issued subpoenas to IPO participants requesting trading reports and other documents, the Journal said, citing people familiar with the matter.
Some insiders say the trade practices are common. Since the commissions are negotiated, they are not illegal, one insider familiar with trading practices said.
"This has been going on for years," the insider said. "This is nothing new. Everyone does it."
Both the U.S. Attorney's office in Manhattan and the SEC declined to comment.
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