Tags: SEC | Goldman | Settle | Research

SEC, Goldman to Settle Research Case for $22 Million: Sources

Thursday, 12 Apr 2012 07:24 AM

 

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U.S. securities regulators are preparing to announce that Goldman Sachs will pay $22 million to settle allegations the bank did not have adequate policies to prevent research from being passed inappropriately to preferred clients, people familiar with the matter said.

The Securities and Exchange Commission's case against Goldman is expected to be similar to one that the bank settled last year with Massachusetts securities regulators, several sources told Reuters.

The $22 million penalty will resolve charges by both the SEC and the Financial Industry Regulatory Authority, which self-polices the brokerage industry, these people said.

Sources spoke anonymously because the settlement has not yet been made public.

The settlement could be announced as early as Thursday, though the SEC agreed to the terms of the settlement a few weeks ago, several of those people said.

Both an SEC spokesman and a Goldman Sachs spokesman declined to comment.

In the Massachusetts case, Goldman paid $10 million to resolve civil charges that it had improperly passed analysts' hot stock tips to preferred clients.

The expected SEC settlement and the prior Massachusetts settlement come after a major 2003 settlement with Goldman and other Wall Street firms over conflict-of-interest allegations involving their research analysts.

The banks then collectively paid $1.4 billion to resolve claims that they issued overly optimistic research on companies to win their investment banking business.

Improper relationships between research and investment banking was again at issue in the 2011 Massachusetts settlement, when Goldman agreed to stop organizing private meetings of traders and stock analysts, known as "huddles."

In that 2011 settlement, Goldman also admitted to a set of facts, including that it tried to increase business from one client by having analysts call the client's traders directly.

Goldman also admitted in that case the practice was approved by managers.

Such an admission was rare for civil settlements, where defendants typically will neither admit nor deny all of the allegations.

In the upcoming settlement with the SEC, Goldman is expected to admit to a similar set of facts, one of the sources said.

Recently the SEC changed its policy where defendants in some cases may acknowledge facts already admitted to in parallel criminal proceedings.

This case, however, involves only related civil proceedings.

© 2014 Thomson/Reuters. All rights reserved.

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