Securities and Exchange Commission
Litigation Release No. 18113 / April 28, 2003
Securities and Exchange Commission v. Goldman, Sachs & Co., 03 CV 2944
(WHP) (S.D.N.Y.)
SEC SUES GOLDMAN SACHS FOR RESEARCH ANALYST CONFLICTS OF INTEREST FIRM
TO SETTLE WITH SEC, NASD, NYSE, NY ATTORNEY GENERAL, AND STATE
REGULATORS
The Securities and Exchange Commission announced today that it has
settled charges against Goldman, Sachs & Co., a New York-based
investment bank and securities firm, arising from an investigation of
research analyst conflicts of interest. This settlement, and
settlements with nine other brokerage firms, are part of the global
settlement the firms have reached with the Commission, NASD, Inc., the
New York Stock Exchange, Inc. ("NYSE"), the New York Attorney General,
and other state regulators. As part of the settlement, Goldman Sachs
has agreed to pay $25 million as disgorgement and an additional $25
million in penalties. One-half of the total of these payments - $25
million - will be paid in connection with the SEC action and related
proceedings by the NASD and NYSE and will be placed into a
distribution fund for the benefit of customers of the firm. The
remainder will be paid to resolve related proceedings by state
regulators. In the SEC action, Goldman Sachs has agreed to a federal
court order that will enjoin the firm from future violations of NASD
and NYSE rules and require the firm to make changes in the operations
of its equity research and investment banking divisions. In addition,
Goldman Sachs will pay, over five years, $50 million to provide the
firm's clients with independent research, and $10 million to be used
for investor education.
In connection with this matter, the Commission today filed a Complaint
against Goldman Sachs in the U.S. District Court for the Southern
District of New York, alleging violations of NASD and NYSE rules.
According to the Commission's Complaint, from at least July 1999
through June 2001, research analysts at Goldman Sachs were subject to
inappropriate influence by investment banking at the firm. The
Complaint also alleges that Goldman Sachs published exaggerated or
unwarranted research and failed to maintain appropriate supervision
over its research and investment banking operations.
Specifically, the Commission's Complaint alleges that
* Goldman Sachs compensated its analysts based at least in part upon
their participation in the firm's investment banking-related
activities. Analysts were required to prepare business plans that
discussed, among other things, what steps the analysts planned to
SNIPPETS:
Securities and Exchange Commission v. Goldman, Sachs & Co., 03 CV 2944
SEC SUES GOLDMAN SACHS FOR RESEARCH ANALYST CONFLICTS OF INTEREST FIRM TO SETTLE WITH SEC,
The Securities and Exchange Commission announced today that it has settled charges against
This settlement, and settlements with nine other brokerage firms, are part of the global
Goldman Sachs has agreed to pay $25 million as disgorgement and an additional $25 million in
One-half of the total of these payments - $25 million - will be paid in connection with the
The remainder will be paid to resolve related proceedings by state regulators.
Goldman Sachs has agreed to a federal court order that will enjoin the firm from future
In connection with this matter, the Commission today filed a Complaint against Goldman Sachs
According to the Commission's Complaint, from at least July 1999 through June 2001, research
the Commission's Complaint alleges that * Goldman Sachs compensated its analysts based at
Analysts were required to prepare business plans that discussed, among other things, what
Get more investment banking revenue.
* Goldman Sachs analysts participated in investment banking marketing efforts, including
these conflicts resulted in analysts publishing recommendations that were exaggerated or
For example, in August 2000, the business unit leader for U.S. telecommunications research at
The ratings were a residual from, and I never changed them, not wanting to disrupt things too
The final judgment also orders the firm to make the payments described above, and provides
In addition, the final judgment orders Goldman Sachs to implement structural reforms and
In addition, Goldman Sachs must disclose on the first page of each research report whether
Goldman Sachs also has agreed as part of this settlement to retain, at its own expense, an
This review will be conducted eighteen months after the date of the entry of the Final
|
