(Adds CSFB statement, paragraphs 6,7)
NEW YORK, Sept. 19 (Reuters) - Massachusetts state securities regulators on Thursday recommended that the New York State Attorney General bring criminal charges against Credit Suisse First Boston over its stock research.
ADVERTISEMENTNew York Attorney General Eliot Spitzer hasn't decided how to proceed, a spokeswoman said.
"We need to consult with the Massachusetts authorities and review the evidence, so we have not made a decision on whether or not we would move forward with criminal charges," the spokeswoman said.
Massachusetts regulators have been investigating analysts' conflicts of interest at CSFB as part of the multi-state probe into Wall Street analysts. The investigation by Massachusetts Secretary of State William Galvin has focused in part on e-mails showing that CSFB analysts felt pressured to recommend stocks to please potential investment-banking clients, and that there may have been a link between such positive recommendations and analysts' receiving compensation from CSFB's investment banking division.
New York State's Martin Act provides the New York State Attorney General with an especially potent ability to bring criminal charges against individuals and firms accused of securities fraud.
Later on Thursday, CSFB issued a brief statement saying it would cooperate fully if Spitzer decides to launch a criminal investigation. The firm added it is confident Spitzer will determine that a criminal proceeding is unwarranted.
"CSFB is dedicated to upholding the highest standards for research independence and ethical behavior," the company said in its statement. "Over the past year, we fully embraced the Spitzer initiatives to achieve systemic reforms to promote analyst objectivity."
FORTY-STATE COALITION
Spitzer used the threat of a Martin Act prosecution against Merrill Lynch & Co. (NYSE:MER - News) to force the No. 1 U.S. brokerage in May to agree to pay a $100 million fine and implement various structural reforms, after he had uncovered instances in which Merrill Internet analysts privately trashed stocks to which they had given top ratings.
The criminal referral by Massachusetts is the first formal action taken against a Wall Street firm by a state since Spitzer received support from a coalition of about 40 states for a broadened probe into analyst research practices.
The states have since then formed into teams to pursue the inquiries. New York is leading a probe of Citigroup's (NYSE:C - News) Salomon Smith Barney unit and Morgan Stanley (NYSE:MWD - News). Alabama is examining Lehman Brothers (NYSE:LEH - News) and Utah is probing Goldman Sachs Group <GS.N. New Jersey is investigating Bear Stearns (NYSE:BSC - News).
The states have formed a steering committee with about a dozen states that is chaired by New York, New Jersey, and California. That committee would be likely to have input into New York's decision on the Massachusetts referral
The New York probe into Merrill has also led to probes by other securities regulators into Wall Street analyst practices, including by the Securities and Exchange Commission, the National Association of Securities Dealers, and the New York Stock Exchange.
Credit Suisse First Boston is a unit of Swiss-based Credit Suisse Group (CSGZn.VX) (NYSE:CSR - News).