8 Ways Life At Goldman Sachs Will Never Be The Same Again

Fabrice Tourre In Court

Photo: AP

¬†When Goldman Sachs became embroiled in the Abacus scandal , CEO Lloyd Blankfein decided enough was enough.A committee was established to conduct an in-depth review of the firm’s practices – a necessity acclerated by a ton of negative customer surveys.

The findings of that 8-month review came out today.

Blankfein presented the results to his partnership yesterday, saying,

“Our history of good performance through the crisis became a liability as people wondered how we performed so well and whether we’d received favourable treatment from well-placed alumni. This was not only a poor place to be, it was a dangerous place to be. This firm has one reputation: yours.”

Goldmanites must ask the same question before Every. Single. Transaction.

There must be FULL disclosure of conflicts of interest on all transactions; ie. No more Abacuses

  • We will be clear with our clients about the specific responsibilities we are assuming. We will also be clear about what other activities we may continue to perform while we are advising or financing a particular client.

Goldmanites are forbidden from written communication after an IPO deal is reached

  • There are new restrictions on 'written client communications regarding an underwritten security from the announcement of that offering until the offering is priced.
  • In U.S. IPOs, 'the policy further restricts written communications until 25 days after pricing'

Employees must be vigorous about reputational risk

  • An employee can do more to harm the firm's reputation through a single poor judgment than he or she can do to enhance it throughout an entire career.
  • Goldman Sachs has one reputation. It can be affected by any number of decisions and activities across the firm.
  • Every employee has an equal obligation to raise issues or concerns, no matter how small, to protect the firm's reputation.

Securities and Private Wealth cannot under any circumstance recommend a transaction or deal to a client until 30 days after pricing of a deal within the company

  • Securities and Private Wealth staff are forbidden from 'disseminating broadly to clients written sales communications either (i) recommending an investment or transaction, or (ii) expressing a view regarding the issuer or client, its securities or its other financial instruments
  • For offerings of equity, equity-linked securities, high yield debt offerings or loan syndications, the restriction applies for 30 days after the pricing date
  • For material strategic transactions in which Goldman Sachs is advising a party, the restriction applies from public announcement through closing of the transaction.

All communication with clients must be written in plain, simple English - absolutely no highfalutin financial wording can be used

  • We recognise that the language in engagement letters and standard disclaimers is often complex.
  • In their communication with clients, Goldmanites must now 'employ materials written in plain language that articulate 'other activities the firm may continue to conduct while we are advising or financing a particular client.'

Every single stuctured product will be be assembled by the investment bankers; traders are forbidden from creating another Abacus

From now on, structured-finance deals like Abacus will assembled by investment bankers, not traders, and 'even where the firm does not have any legal responsibility to evaluate the suitability of a structured product... the firm should nonetheless conduct suitability reviews as part of our pre-transaction approval process.'

When bankers reach a professional milestone, are required to be undergo a Goldman Sachs culture course

  • To ensure that our values are embedded in the activities and decision-making of our employees, we must repeatedly emphasise the importance of the firm's culture.
  • Instilling a sense of shared values across the firm requires that we constantly and rigorously emphasise, both formally and informally, our culture and each individual's responsibility for it.
  • The firm will use milestones in people's careers as opportunities for targeted training on the Goldman Sachs culture.

Of course you have to pass a whole host of good-judgement tests before you're even allowed through Goldman's doors...

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.