The SEC announced its intention to pursue Goldman on Friday but it has since emerged that two out of its five commissioners voted against the decision on Wednesday last week.
"News of the division is likely to be encouraging to Goldman Sachs,” said Samuel Winer at Foley & Lardner. “It’s unusual to have such a split and it raises the possibility that the evidence of the case was not as strong as in other cases,” he added. Goldman Sachs itself has said it has a very strong defence case against the allegations of fraud brought by the SEC.
Jacob Frenkel, a former SEC enforcement officer who is now at the law firm Shulman Rogers said: “Two of the commissioners felt that either as a matter of fact or policy it was not a good idea to take the case further...if Goldman wins the case there will be a lot of finger-pointing at the SEC.”
Reports suggested that Mary Schapiro—a registered independent—joined two Democrats on the commission, Elisse Walter and Luis Aguilar, in supporting the fraud case against Goldman. The two Republican commissioners, Kathleen Casey and Troy Paredes, were opposed, they said.
In recent years, splits on high-profile enforcement cases have been rare. Schapiro, appointed by President Barack Obama, said earlier this year that the agency in her tenure has voted unanimously “north of 90 per cent” of the time on enforcement cases.
Many in the financial industry feel that the SEC’s case against Goldman has been timed to coincide with Democrat attempts to crack down on the banking industry.