Goldman Sachs (GS) has yet to respond to the fraud charges the SEC slammed the firm with earlier this morning. This suggests the SEC published its complaint without giving the firm a heads-up in advance.
Normally, the SEC is in close communication with the targets of an investigation as the investigation progresses. This is why you often see SEC complaints filed at the same time that a settlement is announced. (Recall the Bank of America settlement last year, in which the charges and the settlement agreement were made public at the same time).
In this case, however, Goldman appears to have been caught flat-footed. Not only was a settlement not announced, Goldman has not even issued a statement yet.*
This suggests that the SEC wanted to maximise the headline value of this charge: For the past hour, the SEC and its allegations have consumed the financial press with no response from Goldman. It also suggests that the SEC may be trying to avoid the intense criticism it got when it filed the Bank of America charges last year.
The other possibility here is that the SEC tried to force Goldman into a settlement, but Goldman refused. *As we go to press, Goldman has just announced that the charges are without merit and that it will fight them, so it’s possible that this is exactly what happened. (It’s still likely that the SEC surprised Goldman this morning, though, or Goldman would have had its statement ready an hour ago.)
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