Morgan Stanley and Goldman Sachs have agreed to pay separate $40 million civil penalties to settle SEC charges that they attempted to induce the purchase of stock in the immediate aftermarkets for IPOs, said Doria Bachenheimer, an attorney with the SEC and the agency's assistant northeast regional office director. She said the agency's charges relate to the activities of both firms during 1999 and 2000.
Court papers the SEC filed Tuesday said both firms attempted to induce purchases in several "hot" IPOs, meaning initial offerings in which the stocks trade at a premium on the first day of after-market trading. The SEC filing against Morgan Stanley said the firm violated regulations in the Martha Stewart Living Omnimedia IPO by soliciting a 350,000-share after-market order from a customer before all the shares had been distributed. The Goldman Sachs filing cited the IPOs of CoSine Communications, Marvell Technology Group Ltd. and WebEx Inc.
The proposed settlements remain subject to federal court approval. The U.S. District Court in Washington will consider approval of the Morgan Stanley settlement, and the U.S. District Court in New York will consider the SEC settlement with Goldman Sachs. Ms. Bachenheimer said court dates are not yet set.
Peter Rose, Goldman Sachs spokesman, said the firm does not have a comment on the matter at this time. Melissa Stonberg, Morgan Stanley spokeswoman, did not immediately return a call seeking comment.
