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Fleet Offers Investigation Settlement

The Proposal's Acceptance By Regulators Would Close The Case Against The Disbanded Robertson Stephens, But The Company Still Faces Civil Lawsuits

Nov 16, 2002 | Providence Journal Bulletin FleetBoston Financial Corp. disclosed yesterday it has made a proposal to settle an investigation into the handling of initial public offerings by its disbanded investment banking arm Robertson Stephens.

In the past several months, Fleet has responded to "Wells notices" from the Securities and Exchange Commission and the enforcement arm of the National Association of Securities Dealers concerning their investigations.

Wells notices outline proposed civil charges and give the targets a chance to respond.

New England's largest bank disclosed the receipt of the notices and the settlement discussions in its quarterly filing with the SEC.

"Robertson Stephens has made a proposal to the staffs to settle these matters which we understand is acceptable to them, subject to respective agency approval," the Fleet filing states. "There is continuing discussion on some details."

Fleet senior vice president James Mahoney said a joint settlement with the SEC and NASD is being discussed with staffers from both agencies. Ultimately, any agreement will be subject to approval by the SEC commissioners and NASD.

Mahoney said Fleet has already set aside money for a possible settlement.

"We did that at time of winding down of Robertson Stephens," Mahoney said. He declined to say how much has been reserved for the settlement.

But Fleet said in yesterday's SEC filing that any loss "resulting from the final outcome of these proceedings should not be material to our financial condition or results of operations."

The Wall Street Journal reported in April that Robertson Stephens and J.P. Morgan Chase could face civil charges for taking excessive commissions from large investors who received highly sought IPO shares during the stock market boom in 1999 and 2000.

Robertson Stephens also is a subject of class-action lawsuits related to its underwriting of hot technology stocks.

Fleet shut down Robertson Stephens in July after the collapse of Internet and technology stocks triggered heavy losses at the San Francisco-based investment bank. Fleet had tried unsuccessfully to find a buyer for it.

BankBoston, which merged with Fleet Financial Group in 1999, had acquired Robertson Stephens in 1998 for $800 million from BankAmerica Corp.

In yesterday's SEC filing, Fleet reported a $638-million write-down from the Robertson Stephens closing, which was "substantially completed" during the third quarter, which ended Sept. 30.

Fleet posted net income of $579 million in the third quarter, down from $766 million in the same quarter last year. This year's third-quarter earnings represented a return to profitability after Fleet posted losses in two out of the three previous quarters as a result of problems in its Latin American operations, Robertson Stephens and technology investments.

In a related development, Fleet also said it is shutting down its Nasdaq Stock Market dealer because trading volume has dropped.

Fleet Trading, which made a market in 1,300 national and small cap stocks as the 31st-biggest Nasdaq market maker, had been losing money, said spokesman Charles Salmans. The closing won't be material to earnings, he said.

"About the only thing you could look to was the possibility of trading volumes picking back up and we just didn't see this happening in the near future," Salmans said.

Salmans said a "small number" of employees would be affected, declining to be more specific.

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