NEW YORK (CNN/Money) -
Massachusetts securities regulators have urged New York State Attorney General Eliot Spitzer to file criminal charges against Credit Suisse First Boston, Spitzer's office said Thursday.
The recommendation comes as a result of a probe by the Massachusetts Secretary of State into evidence that allegedly shows CSFB research analysts were pressured to make positive assessments of the firm's clients or potential clients.
Spitzer's office will review any evidence it gets from Massachusetts and decide what action to take. Spitzer's office leads the multi-state anti-fraud task force of which Massachusetts is a part, and any action against CSFB must be filed in the firm's home state of New York.
In a brief statement released Thursday evening, CSFB said it "welcomes and will cooperate fully" with any investigation and defended its policies and practices.
"CSFB is dedicated to upholding the highest standards for research independence and ethical behavior," the firm said in the statement. "Over the past year, we fully embraced the Spitzer initiatives to achieve systemic reforms to promote analyst objectivity."
Earlier this year, Spitzer won $100 million settlement from Merrill Lynch, along with promises from that firm to reform its research practices. The attorney general is seeking reforms in the industry to better separate broker-dealers' equity research departments from their investment banking arms.
Last January, CSFB agreed to pay $100 million in fines to the Securities and Exchange Commission and the National Association of Securities Dealers for allegedly taking millions of dollars from customers in inflated commissions in exchange for allocations of "hot" initial public offerings. CSFB didn't admit or deny the charges against it.
In August, the NASD suspended and fined six current or former CSFB executives in association with those charges. Earlier this month, the Wall Street Journal reported that federal regulators are looking into whether or not CSFB gave out shares of hot IPOs to win investment banking deals.
The research analyst probe
During the Internet boom, analysts at CSFB allegedly rated stocks a "buy" while secretly telling large investors and insiders contrary opinions, according to a published report Thursday. Similar practices led Merrill to pay $100 million in a settlement with Spitzer's office.
Securities regulators in Massachusetts obtained company e-mails that detail how CSFB analysts felt pressure to positively rate investment banking clients, USA Today reported.
The e-mails also indicate the firm doled out shares of initial public offerings to executives who hired CSFB for banking deals, and that a high-profile investment banker at CSFB, Frank Quattrone, tried to control the company's stock research team, according to the newspaper report.
"The discoveries keep coming, and they keep getting more and more amazing," William Galvin, Massachusetts Secretary of State, told the paper.
In one instance, CSFB analyst Bhavin Shah sent an e-mail to the firm's head of technology research, Elliott Rogers, saying he faced a tough decision on how to rate Chartered Semiconductor (CHRT: Research, Estimates) and United Microelectronics (UMC: Research, Estimates), two companies the firm helped take public, according to the USA Today article.
Another analyst, Tim Mahon, responded to Shah and Rogers: "Suggest that you ask Elliott about the 'Agilent Two-Step.' That's where you have a buy rating (like we do on CHRT, and thank God it's not a Strong Buy) but verbally everyone knows your position," the paper reported.
Rogers was an analyst at CSFB and initiated coverage on Agilent with a "buy" rating when the firm took the company public in 1999, the paper said.
CSFB, a unit of Zurich-based Credit Suisse Group (CSR: Research, Estimates), said it has fixed the problem and has made moves to strengthen analyst independence, according to the USA Today.
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