H&Q faulted for IPO actions (Hambrecht&Quist owned by JP Morgan Securities)

SJ Mercury News ^ | 2/21/03 | Deborah Lohse

[NormsRevenge]

In the latest crackdown on illicit practices during the technology-stock boom, regulators fined the parent of San Francisco investment bank Hambrecht & Quist $6 million for accepting what amounted to kickbacks from customers eager to get hot stock in initial public offerings.

[NormsRevenge]

The tip of the iceberg?

[NormsRevenge]

FYI Ping.

[Grampa Dave]

Absolutely incredible!

Typically, only a bank's largest customers -- mutual funds that trade millions of shares using the bank's trading desk, say -- would receive large allocations of hot IPO shares. But as the bubble progressed and IPO share prices spiked 100 percent or more routinely on their first day, more and more customers clamored to get in on the ground floor of IPO deals.

H&Q was the manager of many hot deals during the period NASD investigated. Among the 12 deals that Hambrecht & Quist managed in late 1999 and early 2000 were Sunnyvale-based Vicinity, which rose 187 percent in its first day of trading, and San Jose-based Immersion, which rose 57 percent, according to data from Thomson Financial.

IPO activity

In order to ensure that they got in on such hot deals, some customers began sending trading orders for thousands of shares of blue-chip stocks like Compaq to H&Q, agreeing to pay extra-large commissions on such trades. Such trading typically happened on IPO day.

In one H&Q example cited by NASD, a customer got 75,000 shares of an unspecified IPO on Feb. 29, 2000. (H&Q handled the IPO of Massachusetts-based NetGenesis on that date.)

The customer sold the IPO shares, netting a $2.7 million profit. Apparently in return for the windfall, the customer proceeded on the same day to buy and sell shares of Compaq and Lucent, paying commissions of up to 74 cents a share, netting H&Q $690,000 in inflated commissions, or 25 percent of the customers' NetGenesis profits.

This adds a new dimension to Insider Trading. If you were a top stock buyer, you had to be alerted to the IPO and what you had to promise to buy from these criminals after you made your killing in less than one day.

[pechuna]

The Sicilian Solution should be employed. Badabing, badabing!

[babaloo]

This thievery occurred under the watchful eye of Arthur Levitt, the SEC Chairman appointed by Clinton who served from 1993-2001. Clearly he looked the other way in order to make sure that his buddy enjoyed the fruits of the market bubble. The auditors looking at the books of the brokerage firms had to know this was going on.

[Liz]

Truly outrageous. These people have a scam-a-second going for themselves.

[cyncooper]

Industry regulator NASD charged that from November 1999 to March 2000,

March of 2000 and President Bush, long stymied by the opposition in getting his administration in place is making headway and certain parties realize the days of looking the other way are over.

Most interesting.

[Liz]

Bubble, Clinton bubble, toil and trouble........(paraphrasing the bard).......

[cyncooper]

Whoops, I'm thinking of March 2001! My mistake

Still this took place under Clinton's watch, and I want to blame him! LOL

[Liz]

Everyday, it becomes more and more apparent for invested Dumycrats why Algore just had to win.

[Liz]

Don't give up hope. There's lotsa paper to plow through. Betcha this scam goes back.......way back.

[Billy_bob_bob]

It is stories like this one that have convinced me to never, ever invest in equities again. The scumbags who run these frauds, er, "corporations" cannot be trusted to any degree whatsoever. I made a lot of money in the market, but I knew the game was going to end someday and I got out while the getting was good. Still, who knew things were this corrupt?

I no longer care what "laws" (hahahahahahaha) get passed to "protect the little guy" (hohohohohohoho) or whatever else gets done to "restore confidence" (guffawguffawguffaw) in the markets, this former investor is all done with them. From here on out my primary "investment veihicle" is going to be a savings account.

Funny thing, my grandfather (who lived through the depression) had exactly the same view of equities. Funny how the wheel turns.