A high-profile investment banker at Credit Suisse First Boston faces civil charges for allegedly failing to supervise the firm’s tech-stock analysts and improperly dishing out hot new stocks to clients, a source close to the matter said.
The National Association of Securities Dealers has notified Frank Quattrone of its planned action against him, the source said yesterday, confirming a report in The Wall Street Journal. The source spoke on condition of anonymity.
Sanctions by the national association can include civil fines and even exclusion from the securities industry. The notice to Quattrone gives him a chance to rebut the claims before the association takes action.
Spokesmen for the National Association of Securities Dealers declined to comment.
Quattrone denied any wrongdoing and said he would cooperate with the inquiry, according to a statement released by CSFB in his behalf.
“Throughout my 23-year career in investment banking, I have upheld the highest standards of professional conduct in my work and have complied with all rules and regulations,” he said. “CSFB has found no evidence of wrongdoing on my part.”
The investment bank, based in New York, declined comment.
The move by the national association would be the latest in a series taken by regulators against major investment firms and individuals for alleged violations in sales of new stock, known as initial public offerings (IPOs), during the technology-stock boom in 1999 and 2000.
About a year ago, CSFB agreed to pay $100 million to resolve regulators’ allegations of abuses in its distribution of lucrative IPOs.
The securities association is alleging that Quattrone was involved in distributing IPO shares to Silicon Valley executives whose companies did investment-banking business with CSFB.
Federal regulators recently outlawed the practice, known as “spinning.” Critics have said it gave corporate executives an unfair advantage in the IPO market while shutting out small investors.
Quattrone reportedly directed some IPO shares to so-called “Friends of Frank” accounts.
As an investment banker, Quattrone, 47, had the unusual position of heading CSFB’s team of technology stock analysts. He is accused of failing to prevent conflicts of interest that occurred when analysts issued favorable research reports on companies that were investment-banking clients of CSFB.
CSFB, one of Wall Street’s biggest investment firms, was among nearly a dozen such firms that recently agreed to pay $1.4 billion to settle claims they misled customers with biased stock research. CSFB is paying $200 million.
Quattrone, whose office is in Palo Alto, Calif., joined CSFB in 1998 from Deutsche Bank AG. He quickly became a key player in the technology boom.