Financial Regulatory Forum

Private placements and conflicts of interest: do consenting adults need more protection? – COLUMN

By Helen Parry, Thomson Reuters Accelus regulatory intelligence expert. The views expressed are her own.

LONDON, May 16 (Thomson Reuters Accelus) -

“The first private placement memorandum disclosed the possibility that new investors may help pay distributions to old investors but this was not a risk; it was a certainty.” (US Securities and Exchange Commission v Bravata 2011 WL 339458.)

“This disclosure indicates that GSI may invest in securities that are ‘adverse to’ the Hudson investments … Goldman had already determined to keep 100 per cent of the short side of the Hudson CDO.” U.S.  Senate Investigations Subcommittee Levin-Coburn Report on the Financial Crisis.

The fact that investors in the Billionaire Boys Club property investment Ponzi scheme, the subject of the Bravata case quoted above, blithely handed over their hard-earned cash, despite the fact that the private placement memorandum disclosed that it may be just that, is a striking example of the dangers that may befall unwary investors who fail to check the small print.

Nevertheless, although disclosing the fact that one might be operating a Ponzi scheme or a conflicted interest may not suffice to protect one from potential liability for misrepresentation or fraud if one has already determined to engage in such a course of action, disclosing such matters when one is yet to make such a determination and the statement is, therefore, true, may do the trick, at least in the case of the collateralized debt obligation (CDO). (more…)

ANALYSIS-Goldman foe gets some revenge in reform bill

By Matthew Goldstein

NEW YORK, June 28 (Reuters) – One of the sleeper provisions in the 2,000-page financial regulatory reform bill may be one that is no more than six paragraphs long.

The brief section of the massive bill is aimed at stamping out some of the conflicts of interest that arise from Wall Street’s packaging and marketing of asset-backed securities — investment products backed by a pool of mortgages, loans or bonds.

The measure could give U.S. securities regulators the authority to ban a narrow class of so-called securitized products that enable Wall Street banks to take the opposite side of trade from a client, lawyers and other structured finance experts said.

Goldman Sachs making lemonade

Goldman Sachs has “a lot to answer for,” Sen. Carl Levin said ahead of a hearing that will focus on the role investment banks played in the financial crisis. Lawmakers have been pressing for more information ever since the SEC accused Goldman of fraud for its role in underwriting a controversial subprime security. Thomson Reuters’ WG&L Accounting & Compliance Alert looks at the issues.  Click here for more details.   (more…)

BREAKINGVIEWS-Neither Goldman nor Senate makes killer case

By Antony Currie

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

LONDON, April 26 (Reuters Breakingviews) – The U.S. Senate’s investigations unit has scored some easy political points in its study of Goldman Sachs’s subprime mortgage activities in 2007. But there is no concrete evidence of wrongdoing, or even of an excessively zealous search for profits, in the four exchanges of embarrassing emails from the Wall Street firm released over the weekend.

Still, Goldman hardly makes a killer case with its defence — that it was merely hedging risk.

Copy of shareholder suit against Goldman Sachs, Blankfein over Abacus

Goldman Sachs Group Inc <GS.N> and Chief Executive Lloyd Blankfein were hit with a shareholder lawsuit claiming they hid key details about a risky transaction that resulted in civil fraud charges and a plummet in its stock price. Goldman Sachs Group Inc  and Chief Executive Lloyd Blankfein were hit with a shareholder lawsuit claiming they hid key details about its Abacus transaction that resulted in civil fraud charges and a plummet in its stock price.  Here is a copy of the suit.


Goldman Sachs profit tops forecast, UK opens probe

A security guard walks through Goldman Sachs lobby in New York   By Steve Eder and Steve Slater
   NEW YORK/LONDON, April 20 (Reuters) – Goldman Sachs Group Inc <GS.N> said first-quarter earnings nearly doubled, and Britain’s financial regulator launched a formal probe related to civil fraud allegations against the Wall Street bank. (more…)