Goldman Sachs Is Fined in the U.K.




By DAVID ENRICH and BRETT PHILBIN, September 9, 2010


Goldman Sachs Group Inc. agreed to pay a fine of nearly £20 million ($31 million) to the United Kingdom’s Financial Services Authority and concede that the company made a mistake in regulatory disclosures about trader Fabrice Tourre, according to people familiar with the situation.



Mr. Tourre is the London-based trader at Goldman who was accused of fraud in an April lawsuit by the Securities and Exchange Commission. Goldman agreed in July to pay $550 million to settle SEC civil chargesagainst the company, but Mr. Tourre is fighting the allegations.



As part of an announcement expected Thursday, Goldman will acknowledge an error in not informing the U.K.’s main financial regulator that Mr. Tourre was under SEC scrutiny at the time that he moved to Goldman’s U.K. subsidiary from New York in 2008, these people said.



FSA officials concluded that Goldman failed to disclose as required at the time that Mr. Tourre was being scrutinized by the SEC over his role in the creation and sale of a collateralized-debt obligation called Abacus 2007 AC-1, people familiar with the matter said.



The SEC has accused Mr. Tourre, who is on paid leave from Goldman, of arranging the deal despite believing the housing market was about to collapse. Pamela Chepiga, a partner at law firm Allen & Overy LLP who represents Mr. Tourre, couldn’t be reached for comment Wednesday. A Goldman spokesman and FSA spokeswoman declined to comment.



The fine would be one of the largest ever by the FSA, which has revved up its enforcement push after a long history of criticism as a weak-kneed regulator of City of London financial firms. In comparison, the agency announced in June a £33.3 million penalty against a J.P. Morgan Chase & Co. unit for failing to separate client money from the firm’s accounts.



With Goldman, the FSA took the unusual step of publicly announcing an investigation of the company within days of the SEC’s lawsuit, even though the Abacus deal was created in the U.S. The probe was launched under pressure from then-Prime Minister Gordon Brown shortly before U.K. elections in which he lost a re-election bid.



Goldman’s concession that it erred in its handling of Mr. Tourre’s registration is similar to the firm’s July statement that it made “a mistake” by not disclosing the role of hedge-fund firm Paulson & Co. in the Abacus deal.



Separately, proprietary traders within Goldman’s U.S. principal strategies equities unit are in talks to join other firms, according to a person familiar with the situation. The firms include KKR & Co., BlackRock Inc., Perella Weinberg Partners LP, Carlyle Group, and Pacific Investment Management Co., according to this person.



Such traders are exploring their options because of the so-called Volcker rule, which limits banks’ trading. Last week, Goldman decided to close its principal-strategies business to comply with the law.



Bob Howard, leader of Goldman’s U.S. principal strategies equities team, is likely involved in the talks. If he elected to join another firm, he would take members of the team with him, the person familiar with the situation said.



Morgan Sze, who leads Goldman’s proprietary trading business in Asia, is considering starting his own hedge fund, while a number of discussions regarding the European operations are still under way, according to the person.



Write to David Enrich at


Source: Proshare



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