New York City has ended its investigation into First Boston Corp. without finding evidence that the investment bank acted improperly during the controversial refunding portion of a city bond sale, the city's corporate counsel said Friday.

But the Securities and Exchange Commission is continuing its probe into the March deal and whether First Boston conducted insider trading, city officials confirmed on Friday.

O. Peter Sherwood, the city's corporate counsel, said Friday that the city and its disclosure counsel, Lord Day & Lord, Barrett Smith, terminated its investigation of First Boston sometime in May, more than two months after allegations emerged that the firm may have conducted insider trading as the bookrunner and senior manager of a $1 city billion bond offering on March 4.

The city also investigated First Boston's role as the lead bank in the deal and whether the firm had met its responsibility to act in the best interest of the city.

Although the city cleared the investment bank in March of the insider trading charges, it continued to investigate First Boston's role as fiscal agent for the city's bond deal.

On Friday, Mr. Sherwood said the city could not determine that the investment bank acted improperly, and as a result terminated its investigation. He refused, however, to exonerate the firm of all wrongdoing.

"We have not concluded that [First Boston] had breached its fiduciary responsibility," he said.

When asked to elaborate on his statement, Mr. Sherwood said, "Much of this is getting into people's heads, and I can't vouch for what is in people's heads. But based on the evidence we have seen, we cannot conclude that they have breached their fiduciary responsibility."

City officials also confirmed that the Securities and Exchange Commission continues to investigate the matter. On June 19, officials from the commission interviewed Darcy Bradbury, the city's deputy comptroller for finance, and Mark Page, the deputy director and general counsel of the city's Office of Management and Budget, city sources said. Ms. Bradbury refused to comment on the interview. Mr. Page was unavailable for comment.

A First Boston spokeswoman said the SEC has concluded its investigation of the firm. Richard Walker, SEC regional administrator for New York, was unavailable for comment.

A First Boston spokeswoman said the firm did not engage in illegal activity and acted in the best interest of the city.

At issue are the events surrounding First Boston's purchase of $13 million of taxable city general obligation bonds as part of a city refunding effort two week's before the city's March GO bond sale.

The city in January had asked First Boston to purchase the bonds in the secondary market, as part of the refunding of these higher-coupon taxable securities. In the refunding, First Boston would purchase these bonds in the secondary market and the city, in turn, would buy the bonds from First Boston after the GO bond sale.

But in March several city officials charged that the investment bank could have profited from the purchase because documents later showed that the bonds were placed in an account marked "for the Street," Securities in that account reflect possibly higher day-to-day market prices, rather than the original price First Boston had tendered.

The firm was accused of insider trading because it was given information by the city on which bonds the city was going to redeem. Under the insider trading scenario, the firm could have profited from buying these bonds at a low price, placing them into an unnamed account, and then reselling the bonds back to the city at a higher price. The city would not have known that the firm had set up such an arrangement.

First Boston has denied charges of possible insider trading.

Mr. Sherwood's response is one that may well characterize the opinions of city finance officials regarding First Boston's role in the bond deal. Some city officials believe the investment bank made nothing more than a technical error in marking the bonds "for the Street."

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