Wall Street’s Practice of Compelling Confidentiality of Private Underwriting Fees: An Antitrust Violation?

Abstract

A small oligopoly of commercial and investment banks dominates the arranging and underwriting of loans and bonds for publicly traded companies. The oligopoly’s dominance apparently compels nondisclosure of preliminary agreements that outline the proposed issuance terms of the loans or bonds, which non-disclosure violates the securities laws. Also, the banks do not disclose the arranging and underwriting fees to anyone outside the oligopoly and prohibit disclosure to anyone by their customers. This makes it impossible for customers to compare such fees and more difficult for non-oligopoly banks to offer competing bids. This article concludes the Antitrust Division, and Securities & Exchange Commission should investigate these practices.