Wall Street giant Goldman Sachs may have rewarded executives at firms which gave it lucrative investment banking business with privileged access to 'hot' new stocks, an inquiry has found.

There is no equity in the equity markets

Michael Oxley, House Financial Services Committee

Goldman allocated portions of highly sought after new share issues - so-called initial public offerings or IPOs - to executives at about 20 corporate clients, including online auction house eBay and internet portal Yahoo, a report from a congressional panel said.

Some of the executives sold their shares shortly after receiving them, making hefty profits, the report, from the House Financial Services Committee, said.

The committee said the practice - known as "spinning" - had discriminated against small investors.

"There is no equity in the equity markets," said committee chairman Michael Oxley, the Republican representative for Ohio.

"I call on every Wall Street firm to show respect for America's individual investors by reforming these corrupt practices immediately."

Denial

Goldman Sachs rejected the report's findings, saying it had sold new shares only to its brokerage clients.

"This is an egregious distortion of the facts," the bank said.

"The suggestion that Goldman Sachs was involved in spinning or other inappropriate practices around [share] allocation is simply wrong."

The committee is also scrutinising new stock allocation practices at Credit Suisse First Boston and Salomon Smith Barney.

This is an egregious distortion of the facts

Goldman Sachs

New York attorney general Eliot Spitzer earlier this week launched a civil lawsuit against five corporate chiefs in an attempt to recover money they earned through new stock allocations awarded by Salomon Smith Barney.

Regulators team up

The committee's investigation is just one of a series of official probes into potential conflicts of interest on Wall Street during the boom years of the 1990s.

On Thursday, the top US market regulators - the Securities and Exchange Commission, the National Association of Securities Dealers, the New York Stock Exchange and the New York attorney general - said they would join forces to coordinate the outstanding investigations.

The regulators hope to draw up a framework deal which could be used to settle the various enquiries that are still under way.

In the biggest settlement so far, Merrill Lynch paid $100m earlier this year in relation to a probe into allegations that its analysts issued glowing reports on firms they privately disparaged so as to win investment banking contracts from them.