More On Legal & Compliancefrom The Advisor's Professional Library
- Regulatory Oversight of Investment Advisors Although the regulatory environment is in a state of flux, it is imperative that RIAs adhere to their compliance obligations. To ensure compliance, RIAs and IARs must fully understand what those obligations are.
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
FCIC Chairman Phil Angelides and Vice Chairman Bill Thomas announced that Goldman Sachs was subpoenaed "for failing to comply with a request for documents and interviews in a timely manner."
The FCIC is investigating the causes of the financial and economic crisis that still grips the U.S. and is to report its findings and recommendations to Congress in mid-December.
SEC Pressing Goldman Sachs
Goldman Sachs is already under pressure from an SEC civil suit that alleges fraud in the now-infamous ABACUS 2007-AC1 CDO deal. The underlying portfolio of securities that backed that synthetic collateralized debt obligation (CDO) was connected to the performance of residential subprime mortgage backed securities (RMBS). In that deal, Goldman Sachs originated mortgage-backed synthetic securities for two institutional buyers and also a customer that wanted to effectively sell short the mortgage market and profit from falling values of mortgage securities--allegedly without disclosing that the sell-side customer (hedge fund manager Paulson & Co.) helped select underlying mortgage securities that it believed would fall or default, benefiting Paulson--the short seller.
The SEC charged Goldman Sachs (GS&Co), and an employee, Fabrice Tourre, with fraud on April 16, "for making materially misleading statements and omissions in connection with a synthetic collateralized debt obligation ("CDO") GS&Co structured and marketed to investors." See "SEC Charges Goldman with Fraud."
Goldman Sachs executives testified for 11 hours before a congressional investigation committee on April 27.
The company is also reported to be under criminal investigation by the U.S. attorney regarding the same matter. See related article "Criminal Investigation Reported for Goldman Sachs."
The timeline from FCIC says that since January, Goldman Sachs has not provided the Commission with documents and witnesses in spite of repeated requests that the company do so. The timeline also notes that at one point, Goldman Sachs claims to have started "producing 5 terabytes of documents," equal to about 2.5 billion pages. But the FCIC remained frustrated "with the failure to produce specifically identified documents and the misleading nature of Goldman's Production."
The FCIC also included in the subpoena the requirement for interviews with Goldman Sachs Chairman and CEO Lloyd Blankfein, CFO David Viniar, President and COO Gary Cohn and eight other Goldman executives, as well as "The person most knowledgeable about the ABACUS transactions.... The person most knowledgeable about the use of credit derivatives at Goldman...[and] The person most knowledgeable about transactions between AIG and Goldman."
On May 18, the timeline states, "Commission staff communicated that Goldman had not, provided detail as to what was not produced, and again noted that Commission staff did not understand the continual delays and the inability or unwillingness to provide the information requested despite the fact that Commission staff had granted extensions for Goldman to respond and had participated in numerous written and verbal communications."
The FCIC timeline notes many "incomplete" responses or that Goldman provided documents that were not the requested documents and at times was not responsive, period, and indicates the Commission's "continued frustration with the failure to produce specifically identified documents and the misleading nature of Goldman's production thus far."
Kate McBride (firstname.lastname@example.org) is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.