By Agency Reporter

Friday, 7 Jan 2011

Goldman Sachs Group Incorporated clients considering whether to buy shares in closely held Facebook Incorporated should take heed. Wall Street‘s most profitable securities firm could unload its own holdings without letting them know.

In the last sentence of a one-page investment profile sent to private wealth clients, the firm explains: ”GS Group may at any time further reduce its exposure to its investment in Facebook (through hedging arrangements, sales or otherwise), without notice to the fund or investors in the fund.”

The offering document, obtained by Bloomberg News, shows that $75m of the $450m investment in Facebook by Goldman Sachs is coming from Goldman Sachs Investment Partners, a hedge fund that handles client money. The firm‘s own $375m investment will probably be cut to $300m because Goldman Sachs expects to sell $75m to third parties or to the fund it created so clients could buy a stake in Facebook.

”There may be conflicts of interest relating to the underlying investments of the fund and Goldman Sachs,” according to the Facebook offering document‘s disclosures section. Material in the documents ”is not guaranteed as to accuracy or completeness.”

Goldman Sachs paid $550m in July to settle fraud charges filed by the Securities and Exchange Commission relating to the 2007 sale of a mortgage-linked investment called Abacus. The company said it made a ”mistake” by failing to inform clients in the 2007 deal that it allowed a hedge fund betting against the investment to help put together the deal.

A Goldman Sachs spokesman in New York, Mr. Stephen Cohen, declined to comment Wednesday. Jonathan Thaw, a spokesman for Facebook, also declined to comment.

Source: Punch