Goldman Sachs in negotiations with SEC over settlement, report claims

1 June 2010

Investment bank Goldman Sachs is believed to be in negotiations with the Securities and Exchange Commission (SEC) over resolving allegations it misled investors.

According to the Wall Street Journal, the financial institution is looking to avoid being charged with fraud as part of the resolution.

The financial industry regulator accused the bank and vice-president Fabrice Tourre of deliberately omitting details of an investment product related to subprime mortgages.

Goldman Sachs is alleged to have neglected to reveal that a hedge fund helped choose the securities, then bet against them.

The bank has denied that it or Mr Tourre have committed any crimes.

Unnamed sources close to the matter told the news provider that a legal team representing the bank has met with the SEC at least once since the allegations were made during April.

Meanwhile, an industry analyst has claimed that Goldman Sachs will pay $621 million as part of a settlement to the regulator.

Brad Hintz, former Lehman Brothers chief financial officer and now banking analyst for Bernstein Research, was quoted by Bloomberg as saying: “While this would be painful to Goldman, we believe it would allow both Goldman Sachs and the SEC to walk away declaring ‘victory’.

“Certainly Goldman wants this case settled. Its management has stated that it wants a ’normal’ relationship with its regulators.”

According to the analyst, the money would see $250 million be awarded to the SEC and $371 million to investors in the securities at the centre of the allegations.

By Jim Ottewill

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