Wednesday, April 21, 2010
Bloomberg: After becoming the Securities and Exchange Commission’s Robert Khuzami, told congress the agency must be willing to fight big cases to show it poses a “credible threat”. The most profitable company in the Wall Street history Goldman Sachs Group Inc., a major investment bank in more than a decade reflects the enforcement unit’s new combative approach.
The stakes for the Securities and Exchange Commission’s are high. The image of agency will improve by winning this high profile case. The agency which is already in under financial crisis and its failure to detect fraud including Bernard Madoff’s Ponzi scheme will further tarnish the image of Securities and Exchange Commission.
Goldman Sachs asserted it will “strongly” fight the case, which hinges on whether information withheld by the firm should’ve been assessable to investors. A former SEC official, Mark Radke said, “We’re willing to file big cases, we’re willing to file against the biggest firms, and we’re willing to file about most complicated stuff”.
A former SEC enforcement lawyer, Charles Clark said, “With this adversarial shot across Goldman’s bow, other banks will feel immense pressure to avoid being cast in a similar light”. After financial companies worldwide lost more than $1.78 trillion since the start of 2007, SEC Chairman Mary Schapiro, is expanding protection of so-called sophisticated investors such as pension funds.
Goldman Sachs was accused by the SEC on April 16 of creating and selling collateralized debt obligation in 2007. They further said that it tied to subprime mortgages without disclosing the hedge fund Paulson & Co. helped pick the underlying securities. Jacob Frenkel, a former SEC lawyer said, that stumble and the agency’s failure in the Lehman, Bear Stearns and Madoff cases may have emboldened firms, making them more likely to challenge findings by agency investigators.
