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February 1, 2002

Massive Fine Imposed In Commission Case

By Gregory Bresiger

Credit Suisse First Boston took millions of dollars in inflated commissions from customers and has been censured and fined a massive $100 million, according to NASD Regulation. CSFB took the commissions in exchange for providing clients with allocations of much in demand IPOs, regulators said.

"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. CSFB's behavior undermines the integrity of the capital-raising process," according to Mary Shapiro, president of NASD Regulation.

Regulators said, after a 10-month investigation between May and June 2000, they determined that the commission/IPO practice was widespread. Clients generally paid CSFB six cents a share for executing an agency trade. In the case of the illegal IPO purchases, commissions ranged from $1 to $3.15 per share, regulators said.

"For example," said NASD Regulation, "during the last quarter of 1999, over 3,000 trades were done at these excessive commission rates and hundreds of them were executed with a commission rate of $1 per share or more. Customers paid brokerage commissions of over 12 percent of the principal amount of the trade and numerous accounts provided CSFB with unlawful payments of hundreds of thousands of dollars in a single day as part of these profit-sharing arrangements," according to NASD Regulation. CSFB, which neither denied nor admitted the charges, agreed to a settlement with the regulators. It includes the hiring of an independent consultant.