Credit Suisse payout over trading inquiry

Investment bank Credit Suisse First Boston has agreed to pay out $100m (?65m) to settle a federal investigation into the bank's handling of the internet stocks it took public during the boom of the late 1990s and early 2000.

According to a report in the Wall Street Journal this morning, which quoted sources close to the deal, CSFB has settled with the US securities and exchange commission (SEC) and the regulatory unit of the national association of securities dealers, and the deal will be officially announced later this month.

The payment will end a one and a half year investigation into the bank's lucrative trade in floating popular internet and technology companies on the stock market.

A spokesman for CSFB today refused to comment on the matter or confirm the amount involved.

The SEC has been investigating allegations that the CSFB allocated larger shares of floatation stocks to certain investors, then when investors made quick money on the stocks, they handed inflated commissions - effectively kickbacks - to CSFB.

The agreement means that CSFB will not have to admit or deny guilt in the matter, but it marks the fifth largest regulatory settlement by a securities firm. The deal could also lead to new rules about the handling of initial public stock offerings.

"It's a stiff penalty. That would quite clearly send a very strong message," Edward Fleischman, a former SEC commissioner, told the paper.

CSFB's underwriting of technology stocks in the late 1990s and early 2000 earned the company more than $700m in investment banking fees.

During the boom of technology stocks, the shares often gained spectacularly in value soon after they were first offered on the stock market. CSFB stood accused of favouring certain investors in exchange for kickbacks, allowing those paying for the privilege to make large profits before the bottom fell out of technology stocks.

CSFB - the investment banking arm of Switzerland's second largest bank, Credit Suisse Group - fired three San Francisco-based brokers in June for violating company policy.

All three had worked for Frank Quattrone, the man credited with the company's success in floating technology companies. Mr Quattrone, however, has not been charged in connection with the investigation.