Goldman, JPM face 'laddering' action SEC cracking down on IPO practice
By Steve Gelsi, CBS.MarketWatch.com
Last Update: 7:40 AM ET Nov. 6, 2002
NEW YORK (CBS.MW) -- The Securities and Exchange Commission notified Goldman Sachs Group and JP Morgan Chase that it recommended filing civil securities-fraud and market-manipulation charges against the firms for directing shares of initial public offerings to clients who intended to buy more shares, according to a published report on Wednesday.
The practice, known as "laddering" IPOs, has been under scrutiny for fueling the dot-com bubble and causing IPO share prices to rise quickly and then fall sharply, leaving individual investors who could not get the deals at their offering prices with huge losses.
The Wall Street Journal reported Wednesday that the SEC staff sent a formal warning of the possible charges in a so-called Wells notice, to Goldman Sachs (GS: news, chart) about two weeks ago.
The warning to JP Morgan Chase (JPM: news, chart) came more recently, and applied to IPOs before Chase purchased Hambrecht & Quist in 2000, said the newspaper, which was citing sources with knowledge of the actions.
Goldman said in a statement to the paper that it denies "any allegations of wrongdoing ... and believe there is no basis for the SEC to take such a position."
JP Morgan also denied wrongdoing.
The latest move by the SEC comes as chairman Harvey Pitt resigned under pressure late Tuesday. See full story.
Another IPO practice under scrutiny is so-called "spinning," when IPO shares are given to executives with companies that may or may not be doing business with an investment bank. See full story.
Steve Gelsi is a reporter for CBS.MarketWatch.com in New York. |
