Goldman, Morgan Settle IPO Case

Goldman Sachs Group Inc. and Morgan Stanley agreed Tuesday to an $80-million settlement with U.S. regulators over claims the firms improperly induced investors to buy shares of initial public offerings.

The two New York-based firms will pay $40 million each to settle Securities and Exchange Commission allegations that they told customers they could get better allocations of IPO shares by agreeing to buy more of the shares after they began trading, said Mark Schonfeld, director of the SEC’s New York office.

Goldman shares declined 38 cents to $102.86 on the New York Stock Exchange. Morgan Stanley is privately held.

A settlement of the more than 2-year-old SEC probe marks the end of a lingering regulatory battle with Wall Street firms accused of favoring their biggest investment-banking customers at the expense of individual investors during the stock market bubble of the late 1990s.

The accord follows an agreement in October 2003 by J.P. Morgan Chase & Co., the second-biggest U.S. bank by assets, to pay $25 million to settle SEC civil charges that it engaged in improper IPO allocations. J.P. Morgan didn’t admit or deny wrongdoing.