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Supreme Court Rejects Investor Claims

June 18, 2007

Investors hoping to recoup some of those losses have suffered a setback at the hands of the U.S. Supreme Court, which has rejected an investor suit against Wall Street banks over anticompetitive practices.

In a 7-1 decision, the court rejected the plaintiffs' argument that Wall Street bankers conspired to illegally pump up prices of nearly 1,000 initial public offerings. Many of those stocks surged to dizzying heights in the days following their IPO, only to crash to earth when the selling started in the spring of 2000.

Writing for the majority, Justice Stephen Breyer held that current law does not allow antitrust laws to be invoked in the suit. He said an antitrust action would pose a substantial risk of injury to the stock market.

The high court’s ruling overturns the position of the Second U.S. Circuit Court of Appeals, which found the alleged conduct to be “dangerous manipulation.”

In particular, the appeals court faulted action by Credit Suisse Securities, which allegedly agreed to sell shares to favored customers at low prices, in return for promises to purchase additional shares at higher prices.

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