Goldman And JP Morgan Face IPO Charges

CNN reports that The US Securities & Exchange Commission (SEC) has notified both Goldman Sachs and JP Morgan Chase that it has recommended filing civil securities-fraud charges against them.

The SEC believes that both firms may be guilty of a practice known as 'laddering' - where securities houses direct shares in IPOs to certain clients who have already indicated that they intend to purchase additional shares, a process which will see prices rise quickly. The theory goes that other investors see the shares rapidly rising, clamour to get a piece of the action and are left with a headache and a loss when the original investors sell out at a profit and the shares fall back to more realistic levels.

A spokesman for JP Morgan denied any wrongdoing. Goldman issued a statement which said that it denies 'any allegations of wrongdoing......and believe(s) there is no such basis for the SEC to take such a position'.

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