Credit Suisse First Boston Corp. has agreed to a settlement with the U.S. Securities and Exchange Commission and the National Association of Securities Dealers resolving all outstanding investigations of CSFB into the allocation of shares in initial public offerings.

The agreement fully resolves this matter for CSFB. Under the terms of the deal, it consented to the settlement order without admitting or denying any of the allegations made in the SEC’s complaint.

CSFB agreed to pay US$100 million, including a US$30 million civil penalty to be divided between the SEC and NASD, and a US$70 million payment to be made to the U.S. Treasury and NASD, representing the monies obtained as a result of the conduct described by the SEC and NASD. The SEC determined in this case that it was appropriate to pay funds to the U.S. Treasury rather than to any third parties.

The SEC and NASD alleged that, between April 1999 and June 2000, certain CSFB employees allocated shares in IPOs to customers with whom they had improper profit-sharing arrangements. According to NASD Regulation, during one quarter alone, these inflated commissions on profit-sharing trades accounted for over 22% of CSFB’s commission revenue.

“This conduct was a blatant disregard of NASD rules and a serious breach of a firm’s responsibility not to exploit its position as an underwriter,” said Mary Schapiro, president of NASDR. “CSFB’s behavior undermines the integrity of the capital-raising process which is essential to the health of our economy, and shakes the faith of investors in the fairness of the markets.”

“The commission has taken the unusual step of seeking a federal court injunction to enforce NASD rules in view of the nature and scale of the misconduct alleged in the complaint,” said Wayne Carlin, director of the SEC’s Northeast Regional Office. “In contravention of the applicable rules, CSFB wrongfully obtained for itself tens of millions of dollars of its customers’ IPO profits.”

Neither the SEC nor NASD made any allegations or findings of fraudulent conduct by CSFB. And, neither the SEC nor NASD alleged that any IPO prospectus was rendered false or misleading by CSFB’s conduct, or that this affected either the offering price or aftermarket trading. Last year, the U.S. Attorney’s Office closed its investigation of CSFB’s IPO allocations without bringing any action.

CSFB has also adopted and is implementing revised policies and procedures for allocating IPOs that have been reviewed by the SEC and NASD. It has agreed to retain an independent consultant to review the implementation of these policies and procedures one year from the date of the settlement.

It is also taking disciplinary action against the employees involved in this matter. The disciplinary action includes fines, suspensions without pay, suspensions from supervisory responsibilities, and suspensions from the IPO allocation process. Previously, in June 2001, three CSFB employees based in San Francisco were terminated.

John Mack, CEO of CSFB said, “We are very pleased that our firm has reached a full resolution of this matter with regulatory authorities. When I joined CSFB last year, I said that putting this behind us must be a top priority. Today’s settlement accomplishes that goal. It allows us to move forward, totally focused on delivering superior service to our clients and continuing to build on our competitive strengths in marketplaces around the world.”