“A major investigation into alleged abuses in the market for initial public stock offerings has widened to include two more securities firms, both leading underwriters of technology issues,” writes Randall Smith in today’s Wall Street Journal.

“The regulatory unit of the National Association of Securities Dealers has notified J.P. Morgan Chase & Co. and the Robertson Stephens unit of FleetBoston Financial Corp. that they could face civil charges for taking excessive commissions from big investors who received hot IPO shares in 1999 and 2000, according to people familiar with the matter.”

“The NASD is investigating whether Wall Street firms improperly gave favored investors larger allotments of coveted IPO stocks during that period. Regulators also are looking at whether those clients in return kicked back part of their quick IPO profits to the securities firms, in the form of inflated commissions on other stock trades.”

“The probe is the biggest regulatory crackdown on the excesses of the dot-com stock boom of the 1990s. During that era, investors scrambled to get shares of Internet IPOs, certain of quick profits, as startups such as VA Linux Systems Inc. soared as much as seven times their IPO price on their first day of trading.”

“In a separate investigation, the Securities and Exchange Commission is examining whether some securities firms coerced investors who got hot IPO shares into placing orders for the same stocks at higher prices on the first day of trading, as a condition of getting the IPOs. That practice, known as “laddering,” contributed to the huge one-day run-ups in many IPOs during the tech-stock mania.”

“The SEC’s laddering probe has focused on firms including Goldman Sachs Group Inc., Morgan Stanley, Robertson Stephens and J.P. Morgan Chase. The agency has been taking testimony from witnesses in that case, according to lawyers tracking its progress. Morgan Stanley has denied any wrongdoing. Goldman and Robertson Stephens have declined to comment on the investigation.”

” ‘It’s clear that this could be a broader problem for Wall Street,’ said Saul Cohen, a partner at New York law firm Proskauer Rose LLP who specializes in securities regulation. In the early phases of the IPO investigation, much of the focus centered on the activities of Credit Suisse First Boston. The probe of the big securities unit of Credit Suisse Group led to the firing of three of its brokers, the resignation of its chief executive and a settlement with regulators in January, in which CSFB paid $100 million in fines and restitution without admitting or denying wrongdoing.”