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Fleet Offers Settlement In Probe of IPOs

Decommissioned Investment Bank Is SEC's Focus

Nov 16, 2002 | The Boston Globe FleetBoston Financial Corp. reported yesterday that it has proposed a settlement that would end a yearlong investigation of its former investment banking division by regulators.

In a quarterly filing of its financial results, Fleet said its onetime investment bank, Robertson Stephens, has proposed a settlement with the Securities and Exchange Commission and the National Association of Securities Dealers ''which we understand is acceptable to them, subject to respective agency approval.'' The two sides are negotiating over some details, the filing indicated.

Fleet announced plans to close Robertson Stephens in July, after a tense series of negotiations between executives at Fleet and Robertson Stephens over a proposed management buyout. Fleet said it was closing the former Silicon Valley highflier, selling all its assets, and laying off the remaining 950 employees.

The investigation into the investment bank's practices in doling out shares of initial public offerings remained, though.

''We have made proposals which we believe are acceptable to the [SEC] staff,'' Fleet spokesman James Mahoney said, ''[but] any agreement would be require approval by the full commission and the NASD.''

BankBoston acquired Robertson Stephens in 1998 for $800 million and was itself taken over by Fleet a year later. New England's largest bank revealed plans in April to sell the unit, but found no willing buyers other than Robertson Stephens' own management team.

Last year, securities regulators opened investigations into Robertson Stephens and at least three other investment banks, trying to determine whether the firms improperly tied lucrative pre-IPO shares to promises by customers to buy even more shares at higher prices once trading began.

Regulators contended that forcing customers to buy the later shares, and artificially inflating the stock's price in the process, amounted to market manipulation. The SEC has also been probing whether investment banks gave IPO shares to corporate executives to attract other investment banking deals.

In previous regulatory filings, Fleet said the investigation focused on whether Robertson Stephens ''manipulated the prices of IPO securities in the aftermarkets through, among other things, alleged agreements with companies receiving allocations to purchase additional shares ... and by false and misleading analyst reports.''

Yesterday, Mahoney would not say whether the proposed settlement would include an admission of wrongdoing by Fleet, but he said the bank set aside money to cover the settlement during the second quarter. He declined to say how much the settlement would be, although a note in the regulatory filing yesterday said Fleet ''considers that the aggregate loss, if any, resulting from the final outcome of these proceedings should not be material to our financial condition or results of operations.''

Fleet cut $435 million from second-quarter earnings to close the San Francisco-based investment bank, but it isn't clear how much of that was for a proposed settlement.

The SEC informed two other investment banks, Goldman Sachs Group and J.P. Morgan Chase, this month that it may file stock fraud and market manipulation charges against them. Mahoney wouldn't say whether Fleet was given the same message, saying only that Fleet has ''received [an SEC] notice within the last several months, but we're not being any more specific than that.''

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