J.P. Morgan to pay $25 million to settle allegations by the SEC

By Marcy Gordon
Associated Press

WASHINGTON — Brokerage J.P. Morgan has agreed to pay $25 million to settle regulators' allegations that it improperly used distributions of hot new stocks to certain customers to get them to buy more shares once trading began.

J.P. Morgan neither admitted to nor denied the allegations made in a civil lawsuit by the Securities and Exchange Commission. The big Wall Street firm also agreed yesterday to refrain from further violations. The settlement is subject to approval by a federal court in Washington.

The violations of securities laws and brokerage industry rules allegedly occurred in 1999 and 2000, during the height of the tech-stock boom and the frenzy of initial public offerings of stock.

In its suit against J.P. Morgan, the SEC alleged that the firm induced some institutional customers that had received IPO stock from the firm to purchase additional shares during the new issue's first few public trading days.

The rules against such conduct are designed to prevent the artificial pumping up of stock prices through purchases that are induced.

SEC enforcement director Stephen Cutler said the case stands as a warning to firms that finance issues of stock that "they cannot engage in conduct that could distort the market for IPO stocks."

Kristin Lemkau, a spokeswoman for New York-based J.P. Morgan, said: "We are pleased that we and the SEC have settled these charges and put this matter behind us."