Credit Suisse First Boston said Monday it has placed the head of its global technology group on leave pending an investigation, as securities regulators prepare civil charges against him.
Frank Quattrone has been notified that the National Association of Securities Dealers was considering action against him for allegedly failing to supervise CSFB’s tech-stock analysts and improperly dishing out hot new stocks to clients, a source close the situation said last week.
CSFB said in a statement Monday that the decision to place Quattrone on leave was based on information it learned Friday, when the pending charges by NASD were first reported in The Wall Street Journal.
The firm said information it learned Friday raised questions about Quattrone’s response to an internal inquiry last week about e-mails sent to employees in December 2000 regarding document retention issues and whether he was aware of pending investigations at that time.
In its statement, CSFB said it had questions about whether Quattrone had acted appropriately when he sent the e-mail and when he permitted a subordinate to send out a similar e-mail.
Following the e-mail, the firm’s legal department acted to ensure all relevant documents were preserved and provided to authorities, CSFB said. CSFB said it is cooperating with regulators.
As an investment banker, Quattrone, 47, had the unusual position of head of 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.
The NASD also is alleging that Quattrone was involved in distributing IPO shares to Silicon Valley executives whose companies did investment-banking business with CSFB.
The practice, known as “spinning,” recently was outlawed by federal regulators. Critics have said it gave corporate executives an unfair advantage in the IPO market while shutting out small investors. Quattrone is said to have personally directed some IPO shares to so-called “Friends of Frank” accounts.
In a statement released Friday, Quattrone denied any wrongdoing and said he would cooperate with the inquiry. Calls to his lawyer were not immediately returned Monday.
Sanctions by the NASD 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 NASD takes action.