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Mass. Asks $1.9 Million Fine, Split-Up At Credit Suisse

Regulators Accuse Firm of Misleading Investors

Oct 22, 2002 | AP

Massachusetts securities regulators filed a complaint yesterday against Credit Suisse First Boston, seeking a $1.9 million fine and an order for the company to separate its research and investment banking divisions.

The regulators accused CSFB of "mocking investors" with misleading research.

The administrative complaint also charges the bank with investing in new public companies for the sole purpose of "justifying the IPO valuation."

Secretary of the Commonwealth William F. Galvin said other action could follow and that some information could be turned over to prosecutors for possible criminal charges. His office has given evidence to New York Attorney General Eliot Spitzer.

CSFB, which has 21 days to file a response, had no immediate comment.

The company's general counsel, Gary Lynch, warned in a letter to Massachusetts officials Sunday that such a proceeding would jeopardize efforts to create new national guidelines by setting up a "state-by-state or 'patchwork' approach to securities regulation."

Galvin, whose office has collected 400,000 copies of e-mail in its investigation of CSFB, said state action is necessary to jolt the industry and the Securities and Exchange Commission into action.

"We act today because the SEC has failed to act and self-policing has failed to protect the investors of the United States," said Galvin, speaking while surrounded by boxes of evidence and poster boards showing quotes from CSFB e-mail.

The complaint could result in a hearing before an administrative law judge, which Galvin said could last weeks or months and produce more evidence. CSFB could appeal any ruling in the general court system.

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