Share 'spinning' investigation

The city watchdog is considering new rules

The UK's financial watchdog is trying to find out if investment banks gave shares in popular flotations to favoured senior executives.

We want to be sure that firms operating in our markets meet the high standards implied by our regulatory principles

Sir Howard Davies
FSA Chairman

The Financial Services Authority (FSA) said it had written to City firms to ask if the so-called spinning of shares had been an important feature of the UK market during the boom in company flotations.

Spinning involves investment banks providing shares in popular flotations to senior executives as a bribe for lucrative corporate finance business.

Authorities in the United States have been investigating the practice.

Last month the New York State attorney general sued five telecom executives for profiteering from shares given to them by investment bank Salomon Smith Barney.

A change in the rules

Sir Howard Davies, the FSA chairman, said the disclosures in the US had thrown the spotlight on initial public offerings of shares.

"We want to be sure that firms operating in our markets meet the high standards implied by our regulatory principles," he said in a statement.

The FSA is asking firms to provide information about the rules they have in place to prevent spinning.

And it is asking for views on a possible change in the rules to outlaw certain practices.