|
Morgan to settle sec case 25m { October 2 2003 } Original Source Link: (May no longer be active)
http://www.sunspot.net/business/bal-bz.morgan02oct02,0,3952829.story?coll=bal-business-headlineshttp://www.sunspot.net/business/bal-bz.morgan02oct02,0,3952829.story?coll=bal-business-headlines
Morgan to settle SEC case, pay $25M
Firm accused of using IPOs to get more business
Associated Press
Originally published October 2, 2003
WASHINGTON - Brokerage J.P. Morgan & Co. Inc. has agreed to pay $25 million to settle federal regulators' allegations that it improperly used distributions of hot new stocks to certain customers to get them to buy additional shares once trading began, the government said yesterday.
J.P. Morgan neither admitted to nor denied the allegations made in a civil lawsuit by the Securities and Exchange Commission. The big Wall Street firm also agreed to refrain from further violations in the settlement, which is subject to approval by a federal court in Washington.
The violations of securities laws and brokerage industry rules are alleged to have occurred in 1999 and 2000, during the height of the tech-stock boom and the frenzy of initial public offerings of stock, known as IPOs.
The SEC and the disciplinary arm of the National Association of Securities Dealers, the brokerage industry's self-policing group, have been investigating Wall Street's dealings in IPOs for nearly two years.
Star investment banker Frank P. Quattrone, whose trial on obstruction-of-justice charges opened Tuesday, is accused of encouraging his colleagues at Credit Suisse First Boston to destroy documents that were being sought in a 2000 probe of how CSFB doled out IPO shares. The investigation was closed in 2001 with no charges filed. Quattrone has denied the charges by federal prosecutors.
Last year, CSFB agreed to pay $100 million to resolve allegations by the SEC and the NASD of abuses in its distribution of new stocks. The $100 million, consisting of $70 million in restitution and fines totaling $30 million, was one of the largest civil penalties ever imposed on a brokerage. The firm neither admitted nor denied the allegations.
In its lawsuit against J.P. Morgan, the SEC alleged that the firm induced some institutional customers that had received IPO stock from the firm to purchase additional shares during the new issue's first few days of public trading. Rules against such conduct are intended to prevent the artificial pumping up of stock prices through purchases that are induced.
In some cases, J.P. Morgan told customers they would have to raise their offering prices for stocks in trading to match the high prices offered by other customers seeking the highly coveted IPO shares, the SEC said. In other cases, the investment firm sought assurances from customers that they would buy as many shares in trading as they had received as IPOs.
In another tactic, the SEC alleged, the firm persuaded one or more customers in July 1999 to accept shares of an undesirable IPO - Biopure Corp. - by promising in return to provide shares in a hot offering of IPIX, or Internet Pictures Corp.
The SEC lawsuit did not name individuals at J.P. Morgan.
"We are pleased that we and the SEC have settled these charges and put this matter behind us," said Kristin Lemkau, a spokeswoman for New York-based J.P. Morgan.
It was the second major enforcement action against the company involving IPOs. In February, J.P. Morgan agreed to pay $6 million to settle the NASD's allegations that its Hambrecht & Quist investment bank got inflated commissions from customers that improperly received IPOs. The firm, which also was censured, neither admitted to nor denied the allegations.
Copyright © 2003, The Baltimore Sun | Get home delivery
|
|
