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Credit Suisse First Boston is reportedly trying to negotiate a settlement with the Securities and Exchange Commission regarding the bank’s allocation of shares in hot technology initial public offerings, according to a report Oct. 18 in the Financial Times. The investment bank indicated that it is interested in negotiations, but that such negotiations have not yet started nor have the terms of any settlement been proposed, the paper wrote. CSFB and SEC officials declined to comment. A settlement would be beneficial to the bank, one securities lawyer observed. “Getting uncertainty out of the way makes good sense,” said John Sturc, a partner with Gibson Dunn & Crutcher, in Washington, D.C. A regulatory investigation can cast a cloud over a business, especially in the financial institutions sector, Sturc said. If the bank is in fact speaking to the SEC, Sturc said, “The question is what are the terms and what are the circumstances.” In an Oct. 2 filing with the SEC, Credit Suisse said that it and “at least five other investment banks, are being investigated by one or more governmental authorities or self-regulatory organizations, including the NASD Regulation Inc.” Both the SEC and the U.S. Attorney’s office are also reportedly conducting probes. Credit Suisse said the probe was “in connection with their practices as to the allocation of shares in initial public offerings in which such investment banks were a lead or co-managing underwriter.” The bank further said that the governmental “inquiries have focused on the allocation practices with respect to initial public offerings in 1999 and 2000, and in particular, the receipt of allegedly excessive on secondary trades from certain accounts that received allocations of shares.” In the filing, CSFB also said that it is cooperating with the investigations. The reported probes have prompted investors to name Credit Suisse, other investment banks and some companies that issued initial public offerings as defendants in putative class actions in federal court. The bank said, in its filing, that it would defend itself against those charges. Several lawyers noted that it would be difficult to identify how a settlement with the SEC would affect CSFB’s role in the cases without knowing what the settlement might be. CSFB is among a group of underwriter/defendants in the cases who are trying to get U.S. District Judge Shira A. Scheindlin removed from presiding over the proposed class actions in the Southern District of New York. In response to the investigations and civil lawsuits, Credit Suisse First Boston has made staff changes that have been viewed as an attempt to extricate itself from the charges. It fired three brokers in connection with the scandal. The bank’s new CEO John Mack has appointed Stephen Volk, a banking partner from New York law firm Shearman & Sterling, as vice-chairman of CSFB. In addition, Gary Lynch, a former SEC enforcement director, became CSFB’s new general counsel. Even Mack’s appointment is widely believed to be another signal that the bank would transform its loose cowboy culture into one of no-nonsense responsibility. Copyright (c)2001 TDD, LLC. All rights reserved.

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