SEC cleared of “improper coordination” with government in Goldman case

15 October 2010

The Securities and Exchange Commission’s (SEC) ruling in the Goldman Sachs fraud case was not politically motivated, an internal investigation has found.

An SEC watchdog at the body found that the timing of the settlement between the bank and the regulator was not influenced by financial reform.

The SEC took legal action against Goldman Sachs and trader Fabrice Tourre earlier in the year accusing the bank of misleading investors by not divulging that the hedge fund which helped select an investment product took a short position against it.

David Kotz, SEC inspector general, launched an investigation into the timing of both the suit and the settlement of the case, which occurred while US politicians were looking to introduce regulatory change to the financial services industry.

In the conclusion to the report, Mr Kohn said: “The OIG found that the investigation's procedural path and timing was governed primarily by decisions relating to the case itself”.

He stated that the decision was influenced by “concern about facts about the investigation's subject matter being publicized prior to the SEC filing an action and concerns about press coverage and maintaining a relationship with the New York General Attorney”.

Goldman Sachs agreed to pay $550 million to the SEC to settle the claims in July of this year.

Fabrice Tourre, the trader at the centre of the legal action, recently called for the case against him to be dismissed as the transaction in question did not take place within the US.

By Jim Ottewill

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