CSFB 'to pay £70m for float abuses'

CREDIT Suisse First Boston has agreed to pay $100m (£70m) to US regulators for abuses surrounding new share listings at the height of the technology boom.

The Wall Street Journal said the investment banking giant had agreed to pay the fifth-largest fine in securities industry history to settle an 18-month Federal investigation into the way the bank handled initial public offerings.

The investigation centred on whether it favoured certain investors by allocating flotation stock to them in return for a cut of the profits they made from selling the shares into a rising market. It also probed whether the investors had agreed to enlarged commission charges on other trades in return for IPO allocations.

CSFB is thought to have earned about $700m from underwriting and fees during the height of the tech boom, outstripping its biggest rivals in the new-listings arena.

The bank is unlikely to admit liability or guilt as part of a settlement with the Securities and Exchange Commission and the National Association of Securities Dealers. However, the deal is likely to include a pledge from CSFB to prevent future improprieties in selling IPOs, and may form the basis for new guidelines in the ways companies should distribute shares for new issues.

The chances of a settlement between CSFB's management and the regulators have improved since former CSFB chief executive Allen Wheat was replaced by Morgan Stanley's John Mack in July. Mack is restructuring the firm and seeking to cut $1bn from a cost base swollen by the top of the bull market. More than 2,000 jobs are being axed.

Official confirmation of the settlement is unlikely until the end of the year. But it could open the door to a wave of settlements involving similar alleged abuses at other large companies, with several big Wall Street names facing lawsuits from disgruntled investors. Goldman Sachs, Merrill Lynch, Chase H&Q, Thomas Weisel Partners and FleetBoston Robertson Stephens were named in a New York class action alleging similar abuses surrounding the float of TheStreet.com.

The companies deny the allegations but the suit is said to be just one of more than 1,000 similar actions being taken across the US. CSFB in London declined to comment on the settlement.