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CSFB, In Talks To Settle

Oct 12, 2002 | Mercury News

Massachusetts regulators have told other state authorities they are attempting to reach a $100 million settlement with Credit Suisse First Boston over allegations that its investment researchers some in the firm's Bay Area offices misled investors, according to two state regulatory sources.

Massachusetts authorities believe some of the firm's analysts did not rate stocks honestly. The authorities think the analysts were motivated to give high ratings to certain stocks to help Credit Suisse's investment bankers win business from the companies being rated.

Negotiations are continuing, these sources said.

A spokeswoman for Credit Suisse in New York said she couldn't comment on ``discussions we may or may not be having with regulators and state officials,'' but said the firm is cooperating with authorities.

A spokesman for Massachusetts' regulator, Secretary of Commonwealth William Galvin, said he had no comment.

The potential settlement was discussed Wednesday during a conference call among state securities regulators, the state regulatory sources said.

Galvin focused an investigation on the relationship between Credit Suisse's technology analysts and investment bankers led by banker Frank Quattrone in Palo Alto. Galvin and other regulators collected e-mails and other documents indicating analysts misled investors by continuing to recommend stocks that they privately disparaged.

As part of such a settlement, the firm would also have to agree to separate its research analysts from the investment-banking division of the firm, the sources said. Such a separation, which is still being negotiated, would go beyond changes the firm has already made, perhaps by creating a separate research unit.

The $100 million -- which is the same amount that Merrill Lynch agreed to pay in a similar settlement with New York Attorney General Eliot Spitzer -- would be split among all states by population, these people said.

Although some members of Congress have been pushing for such fines to be used solely for repaying investors damaged by the conflicted behavior, state regulators think there is no fair or feasible way to determine how much victims lost.

It was unclear Friday how a Credit Suisse settlement with Massachusetts would fit in with the joint investigations, with other regulators, of how numerous Wall Street firms conducted their research and initial public offerings. Earlier this month, the Securities and Exchange Commission, the National Association of Securities Dealers and some state and stock-exchange officials said they were working jointly to find and fix past abuses in the handling of research and IPO offerings during the stock-market boom.

An NASD spokeswoman said the joint efforts are continuing. An SEC spokeswoman couldn't be reached.

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