$586 million settlement approved in an IPO case against Credit Suisse and others

As it became known on Friday, Shira Scheindlin, the judge of the U.S. District Court for the Southern District of New York, reported the approval to the settlement of 309 cases involving initial public offerings marketed between 1998 and 2000, granting tentative approval to a $586 million settlement in these cases. The settlement hearing is scheduled for September 10.

Starting from 2001, thousands of investors filed lawsuits seeking class-action status that named 55 underwriters, more than 300 issuers and hundreds of corporate officers as defendants. The lawsuits were united into more than 300 cases. The underwriters included units of Credit Suisse Group, Morgan Stanley, Merrill Lynch & Co., Bank of America Corp, JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc. 

The investors alleged that IPOs were manipulated by investment banks to artificially inflate the market price of securities and to conceal the amounts of compensation actually received by the underwriters, in the lawsuits. It was also alleged that the underwriters conditioned the allocation of IPO shares on certain aftermarket purchase agreements, required customers who received those IPO allocations to pay undisclosed compensation, and improperly used research analysts by tying analyst compensation to investment banking performance and encouraging analysts to set unrealistic price targets for IPO shares.