Trying such a tactic repeatedly would be "dumb," he argued, because consistently beating expectations by modest amounts gives rise to higher, so-called whisper numbers that analysts circulate to favored investors.

Those practices include allowing favored investors to trade after hours and to buy and sell mutual fund shares over short periods to turn a quick profit, a practice known as timing.

Some fund management companies allowed favored investors to engage in late trading, which is illegal, or market timing, which is a practice prohibited by fund policy.

But while other parts of Wall Street undergo transformation, most initial offerings are still done the old-fashioned way: with high fees and allocations to favored investors.

Until recently, many stock analysts were content to act as well-dressed but passive conduits, conveying information from companies to favored investors.

Two of the favored investors had strong ties to the two fund executives, say regulators, and were among the main investors benefiting from the practice.

In the late 1950's, Republican town officials were caught steering tax-delinquent properties to friends and other favored investors and then splitting the profits.

The attorney general and other regulators have accused fund managers of permitting favored investors to make short-term trades, even when their public filings indicated that they discouraged the practice.

After all the corporate scandals, the Chamber of Commerce sees the ability of executives to tip off favored investors as a fundamental constitutional right.

The initial offering was a bargain for favored Mexican investors.