CSFB facing civil fraud charges

CREDIT Suisse First Boston was expected to be slapped with civil fraud charges by the state of Massachusetts today for alleged conflicts of interest between its research and investment banking divisions.

Massachusetts securities regulators, who are acting on behalf of 42 American states, are demanding a complete separation of the firm's research and investment banking sides and a possible fine of $100m (£64.7m).

A court filing, which would probably include the release of damaging internal emails, would be another blow to CSFB, which in January paid $100m to federal regulators to settle charges it mishandled initial public offering allocations during the dot com boom, charging excessive commissions to big funds in exchange for allocations of 'hot' offerings.

CSFB is among the major banks in settlement discussions with the New York Attorney General and the Securities and Exchange Commission that would provide blanket reform for the industry, and a separate filing by Massachusetts could complicate the federal effort to reach an industry-wide consensus on a global settlement of all conflict-of-interest charges.

Ironically, CSFB has been among the most active in the settlement talks and has been willing to consider a complete separation of banking and research divisions, a move some rivals are fighting, according to reports. CSFB's lawyer Gary Lynch accused Massachusetts of acting unilaterally and threatening to undermine an industry-wide settlement.