GOLDMAN Sachs yesterday warned that it is preparing to be swamped with a deluge of further legal actions connected with its role selling complex mortgage-backed financial products, in the wake of the Securities and Exchange Commission’s (SEC) fraud charges against it.
Goldman said in a quarterly regulatory filing that it is preparing to fight more shareholder litigation, having already fielded a number of secondary complaints over collateralised debt obligations like the “Abacus” deal at the centre of the SEC’s allegations.
The bank admitted the outcome of the SEC case may prompt significant changes to the way it does business, hinting that it could end up the subject of strict regulatory restrictions on the service it is able to offer clients.
“Resolution of the SEC action… could result in collateral consequences to us that may materially adversely affect the manner in which we conduct our businesses, including…an inability to act as a registered broker-dealer or provide certain advisory and other services to US registered mutual funds,” Goldman said. “In addition, regulators could impose restrictions on the activities of our banking, commodities, investment advisory or other regulated businesses.”
Goldman is understood to have already opened negotiations with the SEC over a potential out-of-court settlement of the agency’s civil fraud action against it.
Things were not all bad for the embattled Wall Street bank though – figures released yesterday show it racked up a perfect quarter, failing to lose money during any single day’s trading for the first quarter of this year.