City turns on Swiss rebels: Regulators investigate alleged breaches of rules

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The Independent Online
CITY rivals of Swiss Bank Corporation, one of Switzerland's top banks, have asked three of the City's most powerful regulatory authorities to investigate what they see as a cavalier attitude to the rules by SBC in its attempt to break into London's new issues market.

No charges have been laid, but it is understood that investigations extend to allegations of regulatory breaches and overly aggressive tactics. The Bank of England, the London Stock Exchange and the Securities and Investments Board have been asked to call SBC to account.

The SIB is a statutory body charged with safeguarding the provisions of the Financial Services Act. Contraventions of that law can result in civil or criminal proceedings, depending on their gravity.

The crackdown by the authorities follows a series of stock market coups by SBC over the past 18 months, culminating last week in news that it had managed to muscle in on the underwriting for Eurotunnel's forthcoming pounds 750m rights issue.

SBC's appointment caused outrage among Eurotunnel's established City advisers, SG Warburg, Morgan Grenfell and Banque Indosuez. In an unprecedented move, Sir Alastair Morton, joint chairman of Eurotunnel, also publicly censured Swiss Bank for its behaviour.

The episode is only the latest in a series of increasingly public rows over SBC's attempts to win business in the London market. On at least one occasion last year, BZW complained about SBC to the Stock Exchange and the SIB after it tried to undercut offers for shares received by investors instead of cash dividends.

'They have been driving a coach and horses through the requirements,' said one aggrieved merchant banker, 'while others of us have been trying to work within the legal constraints.'

SBC's aggressive approach to winning new business has divided the City into two warring camps. Jon Wood, SBC's head of proprietary trading, insisted he had been flooded with phone calls supporting what he sees as the bank's stand against the City establishment.

'We've had calls from fund managers, City professionals, clients and chairmen of quoted companies,' Mr Wood said - 'all of whom dislike the traditional City as much as we do. Many of them know what Sir Alastair Morton is like and said we were doing the right thing.'

Sir Alastair has a reputation for broadcasting his forthright views on a wide range of subjects.

Although Sir Alastair, Warburgs and SBC's head office in Zurich were anxious to play down their differences yesterday, it was clear that Mr Wood and his corporate finance colleague, Brian Keelan, were determined to continue on a course they said had been laid down by the bank's parent board. Mr Keelan was on holiday in Positano, southern Italy.

In the next 10 weeks they expect to be involved in deals worth up to pounds 2bn, carving out their role by undercutting traditional merchant banking rivals or proposing ground-breaking schemes for raising money.

'It is true to say that they are being innovative,' one competitor conceded, 'but some of what they have done has not been properly thought out and so has been presented on a half- baked basis. We have pointed this out to them in an amicable way, but it seems they don't want to know.'

Mr Keelan caused dismay in the Eurotunnel camp last week by commenting publicly on both the size and timing of the forthcoming rights issue.

According to Eurotunnel, he also attempted to portray SBC's role in the rights in an exaggerated and overly flattering light.

In a formal statement released to the Stock Exchange, Sir Alastair said Mr Keelan's remarks had been 'improper, incorrect and unauthorised'. SBC's role, he insisted, would be subsidiary to that of Warburg Securities, 'who will be brokers to the issue in the UK'.

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