The Securities and Exchange Commission (SEC) announced late Thursday afternoon that it has reached a settlement with Goldman Sachs & Co. related to civil charges it filed that Goldman misled investors in a subprime mortgage product just as the U.S. housing market was starting to collapse.
The settlement includes a $550 million fine and requires Goldman “to reform its business practices.”
The consent agreement states, “Without admitting or denying the allegations of the complaint (except as to personal and subject matter jurisdiction, which Defendant admits), Defendant hereby consents to the entry of the final Judgment.”
Later in the consent order Goldman acknowledges that it provided incomplete information. It states: “Goldman acknowledges that the marketing materials for the ABACUS 2007-ACI transaction contained incomplete information. In particular, it was a mistake for the Goldman marketing materials to state that the reference portfolio was "selected by" ACA Management LLC without disclosing the role of Paulson & Co. Inc. in the portfolio selection process and that Paulson's economic interests were adverse to CDO investors. Goldman regrets that the marketing materials did not contain that disclosure.”
Robert Khuzami, Director SEC Enforcement stated in the release, “This settlement is a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing.”
Comments on wire service stories on the settlement trended heavily towards viewing the settlement as less than a slap on the wrist.
Below are links to the SEC release, Goldman consent an the proposed judgement