Financial Regulatory Forum

Goldman standards review reflects new compliance landscape

By Nick Paraskeva, for Compliance Complete

NEW YORK, May 29 (Thomson Reuters Accelus) - Goldman Sachs’ report on new business ethics and practices voiced lofty ambitions that are both frequently aired and difficult to implement. But it also articulated higher standards on issues such as reputational risk, suitability and conflicts of interests, which are increasingly demanded by customers, regulators and investors.

The 30-page report was adopted by Goldman Sachs after an extensive review in the wake of financial-crisis scandals that saw it hauled before Congress and pilloried in the press. Violations of compliance standards such as those at Goldman also emerged at several other firms in the post-crisis period. This misconduct has hurt the reputation of the entire financial industry. (more…)

Gupta insider case puts focus on monitoring board members, financial-crisis challenges

Rajat GuptaBy Julie DiMauro and Stuart Gittleman

NEW YORK, June 18 (Thomson Reuters Accelus) - The insider-trading conviction of Rajat Gupta, a former McKinsey group chairman and a-list board member, had federal prosecutors and securities regulators glowing. But companies face stiff challenges protecting their boards from breaches confidentiality by directors and the reputational and other damages that ensue, consultants and lawyers said.

The conviction also draws a contrast with the relative lack of high-level prosecutions stemming from the 2008 financial crisis, which analysts said was rooted in practices harder to establish a case on.  (more…)

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.

SEC’s boardroom bombshell: directors can be costly

Traders work in the Goldman Sachs stall on the floor of the New York Stock Exchange July 16, 2010.  REUTERS/Brendan McDermidNEW YORK, March 4 (Westlaw Business) Being an insider with a fiduciary duty sure is risky, as heavyweight Rajat Gupta is now finding out amidst serious SEC charges. So is having board members, as Goldman Sachs and Procter and Gamble are now worrying. Of great concern to each are the reputational risks and attendant costs that this might impose on them. The potential risks could relate to a broad range of issues, ranging from inside information, to disclosure of SEC investigation and board member protection. Though this likelihood may seem remote, recent experiences from Bank of America to Goldman Sachs itself show them to be painfully possible.

With a plot literally ripped from the headlines and a narrative crackling like a Law & Order script, the Commission has charged Gupta in the spreading Galleon insider trading scandal. The case links Berkshire Hathaway, Goldman Sachs and Procter and Gamble (P&G) to what is shaping up to be one of the biggest non-Madoff financial crime stories of the young century. (more…)

ANALYSIS-New U.S. funds regulator at SEC must shed Goldman skin

The headquarters of the U.S. Securities and Exchange Commission (SEC) are seen in Washington, July 6, 2009. REUTERS/Jim Bourg (UNITED STATES BUSINESS POLITICS)By Ross Kerber and Sarah N. Lynch

BOSTON/WASHINGTON, Jan 19 (Reuters) – For U.S. Securities and Exchange Commission Chairman Mary Schapiro, the choice of a Goldman Sachs Group  insider as her new top funds regulator could be a double-edged sword.

Eileen Rominger will have to prove she can be a neutral regulator of the industry from which she came. She spent the past 11 years at Goldman Sachs, most recently as chief investment officer of Goldman’s asset management unit before announcing her retirement in September. (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.

ANALYSIS-Wall Street still in the hedge fund game

By Svea Herbst-Bayliss and Matthew Goldstein

BOSTON/NEW YORK, June 25 (Reuters) – It appears Wall Street investment banks can stay in the highly-profitable hedge fund business after all.

An overhaul of financial regulations hammered-out by U.S. lawmakers after weeks of negotiation would permit Wall Street banks to continue to manage and sponsor hedge funds along with private equity funds, according to lawyers and Wall Street officials familiar with the massive bill.

For months Wall Street bankers and hedge fund managers have worried that the legislation, which could be signed into law by President Obama within two weeks, would prohibit investment banks from running hedge funds and possibly force them to sell these often very profitable businesses.

from DealZone:

The afternoon deal: Regulation overdrive

MOTOR-RACING-NASCAR/A joint Senate-House of Representatives conference committee convened at 2:15 p.m. EDT to begin merging competing bills from each chamber into what will be the biggest overhaul of the financial rules since the 1930s. Columnist John Kemp explains the simple conference process and the not so simple reality of merging the House of Representatives and Senate versions of the financial reform bill. The "base text" for the regulatory bill is here.

Not to be overshadowed by the financial regulation bill, the Commodity Futures Trading Commission said it plans to boost scrutiny of high-frequency trading, which now accounts for as much as half of all U.S. futures volume, and was fingered for its role in the May 6 stock market "flash crash." Get the details of the co-location proposal here.

The SEC approved new so-called circuit breakers. The rules will require the exchanges to pause trading in certain stocks across U.S. equities markets if the price moves 10 percent or more in a five-minute period.

ANALYSIS-Goldman silence on probe a model others will avoid?

By Matthew Goldstein and Steve Eder

NEW YORK, June 4 (Reuters) – The decision of Goldman Sachs Group Inc not to tell shareholders that U.S. regulators might sue the bank over a subprime mortgage-linked security could cause other companies to rethink the way they handle regulatory investigations.

The investment banking powerhouse has said its lawyers found no reason to disclose a Wells notice from the Securities and Exchange Commission because the transaction at issue was relatively small and the case had little legal weight.

But another calculus may have been at work, too: the potential negative impact that disclosing the Wells notice would have had on the firm’s share price last fall.

Goldman Getting Ahead of Bad News?

Goldman Sachs’s disclosure pendulum appears to have now sharply swung in the other direction, Matthew Merrin of Thomson Reuters Westlaw Business Currents writes. (more…)

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