Ten banks were fined today for alleged violations during the 2010 Toys R US IPO. The banks’ equity research departments were accused of soliciting business for their banks’ fellow investment banking arms. The banks were accused of giving positive research reports on Toys R US in order to secure being on the underwriting of its upcoming IPO. This is a violation of safeguards set by Financial Industry Regulatory Authority over ten years ago. A total of $43.5 million dollars was doled out in fines. Some of the banks that were a part of the violations include Goldman Sachs, JP Morgan, Morgan Stanley, Citi and so on. The accused banks in this scenario have “neither admitted nor denied the charges, but consented to the entry of Finra’s findings.”
This isn’t the first time that this particular issue has come up. Regulators have been dealing for years to try to stop this sort of collusion. During the dot-com boom, many banks would give favorable stock analysis and endorsements in order to land business as well. This could have been one of the reasons for the subsequent burst. In 2003, the New York Attorney General and SEC fined 10 banks $1.4 billion dollars for similar behavior Another interesting trend is the amount of firms, that are private equity backed, are going public. Toys R Us is owned by KKR, Bain Capital and Vornado Realty Trust. Over the past few years, 90 private equity owned companies went public, totaling over 33 billion in deal amounts.