US investment bank Credit Suisse First Boston reportedly will pay $100 million to settle charges that it mishandled initial public offerings (IPOs) during the final days of the 1990s bull market, setting the stage for other Wall Street firms to follow suit.
CSFB, a unit of Swiss financial services giant Credit Suisse Group, will settle an investigation into whether it charged big customers extraordinarily high trading commissions in exchange for shares of high-flying initial public offerings, the Wall Street Journalreported today, citing people familiar with the matter.
The investigation also focused on whether Wall Street firms required rich customers to buy more IPO shares on the first day of trading to guarantee a news-making jump in the stock price. The probe involves many of Wall Street's biggest firms, and has resulted in a flood of civil law suits by disgruntled investors.
Many Internet and other tech offerings skyrocketed on the first day of trading in 1999 and 2000 - sometimes increasing five-fold. Many of those stocks have since crashed in the stock market's wrenching 20-month slide.
A CSFB spokeswoman declined to comment on the matter, and spokespeople for the US Securities and Exchange Commission and the regulatory arm of the National Association for Securities Dealers - which were reported to be negotiating with CSFB on a settlement - declined to comment.
CSFB and its Wall Street rivals rode the tech wave of the late 1990s and early 2000 to capitalise on an insatiable demand for tech IPOs, pulling in billions of dollars in underwriting fees and shattering previous profit records.
The settlement will likely pave the way for new rules governing the allocation of IPOs, the newspaper reported. Stricter rules won't have much of an effect until the IPO market recovers.