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New York, Nov 5: Some of the nation's top securities firms have been sued for allegedly conspiring to fix the fees clients pay to buy and sell the common stock of US companies making initial public offerings.
The suit, made public on Wednesday, names more than 25 companies that underwrite initial public offerings, known as IPOs. The defendants include Goldman, Sachs & Co, Morgan Stanley Dean Witter & Co, Salomon Smith Barney and Merrill Lynch.
The case was filed in Manhattan federal court on Tuesday night and seeks class action status. It was filed by Harold Gillet who bought 500 shares of the IPO of Horizon Offshore Inc in April.
He alleges that, as early as 1994, the firms conspired to raise and fix the price that clients pay for IPO transactions.
"The fee is a major source of underwriters' profits and has been called, the last bastion of the clubby cigar smoking world of investment banking," the suit states.
It alleges that IPO underwriters work together and cooperate in "syndicates" to sell IPOsecurities to the public. Because of this, they allegedly are aware of the fees being charged by one another for IPO securities and have agreed to keep such fees at "supra-competitive levels."
The firms' alleged collusion have led to IPO fees in the US securities market that are on average, twice those charged in foreign markets, despite the greater risk and lower efficiencies involved in underwriting in foreign markets, the suit said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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