(December 13) – “Securities regulators are stepping up efforts to investigate how Wall Street dealers allocate hot initial public stock offerings,” writes Susan Pulliam in today’s Wall Street Journal.

“In subpoenas sent to three major securities firms this week, the New York office of the Securities and Exchange Commission is seeking extensive records of any large stock-trading commissions received by the firms during the past two years, as well as lists of investors to whom the firms doled out IPOs.”

“The firms receiving the data requests — Goldman Sachs Group, Morgan Stanley Dean Witter and Bear Stearns — must provide to the SEC by Monday records of trades of 10,000 shares or more that carried commissions exceeding 10 cents a share during 1999 and 2000, as well as lists of which investors got shares in IPOs led by those securities firms in the same period.”

“Spokeswomen for Goldman and Bear Stearns confirmed receiving the request and said the firms would cooperate. A Morgan Stanley spokesman declined to comment. None of the firms would address any possible wrongdoing. The SEC declined to comment on the subpoena or the investigation.”

“Among firms that haven’t received the request, people on Wall Street said, are Merrill Lynch, the Salomon Smith Barney unit of Citigroup, and Lehman Brothers Holdings.”

“As reported last week, the SEC and the U.S. attorney’s office in Manhattan have launched a joint investigation into whether some investors paid hefty stock-trading commissions in exchange for shares of hot IPOs that surged in price on their first day of trading, and whether those payments constituted illegal kickbacks.”

“The details of this week’s voluminous request represent additional signs of authorities’ efforts to discern how payment of unusually large commissions could have influenced the allocation of IPOs, many of which more than doubled in price on their first day of trading in the period in question. Trades documented in records being sought by the SEC would generally have been executed on behalf of institutional investors or wealthy individuals at rates more than twice the going rate for such trades of five cents a share.”

“The Credit Suisse First Boston unit of Credit Suisse Group has been an early focus of the probe. That firm, as well as Goldman and Morgan Stanley, dominated the market for the kind of high-octane IPOs that initially surged in price after the offerings. The three firms accounted for 53.1% of all IPOs’ dollar volume since mid-1998, according to Thomson Financial Securities Data, a Newark, N.J., data service.”