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S.E.C. Permits Goldman to Keep Issuing Securities

S.E.C. Permits Goldman to Keep Issuing Securities

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Published by DealBook
Letter from the Securities and Exchange Commission allowing Goldman Sachs to keep issuing securities, after the two sides settled a civil fraud legal battle earlier this month.
Letter from the Securities and Exchange Commission allowing Goldman Sachs to keep issuing securities, after the two sides settled a civil fraud legal battle earlier this month.

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Published by: DealBook on Jul 26, 2010
Copyright:Attribution Non-commercial

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12/08/2012

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DIVISION
OF
CORPORATION
FINANCE
UNITED
STATES
SECURITIESAND
EXCHANGE
COMMISSION
WASHINGTON,
D.C.
20549
July
23,2010
Mr.
DavidB.HarmsSullivan
&
CromwellLLP125BroadStreet
New
York,
NY
10004Re:SECv.GoldmanSachs&Co.andFabriceTourre(HO-I0911)
GoldmanSachs
Group,
Inc.-
Waiver
RequestofIneligibleIssuerStatus
under
Rule405
of
the
SecuritiesAct
Dear
Mr.
Harms:ThisisinresponsetoyourletterdatedJuly
15,2010,
writtenon
behalf
of
GoldmanSachsGroup,Inc.(Company)anditssubsidiaryGoldman,Sachs&Co.(Firm)andconstitutinganapplicationforrelieffromtheCompanybeingconsideredan"ineligibleissuer"underRule405(l)(vi)
of
theSecurities
Act
of
1933(SecuritiesAct).OnApril15,2010,theCommissionfiledacivilinjunctivecomplaint(Complaint),intheUnitedStatesDistrictCourtforSouthernDistrict
of
New
York,against
theFirm.ThecomplaintallegesthattheFirmviolatedSection17(a)
of
theSecuritiesAct,SectionlO(b)
of
theExchange
Act
of
1934(ExchangeAct)andRule10b-5thereunder.TheFirmfiledaconsentinwhichitagreed,withoutadmittingordenyingtheallegations
of
theComplaint,totheentry
of
a.
FinalJudgmentagainstit.Amongotherthings,theFinalJudgmentasenteredonJuly20,2010,providesforapermanentinjunctionfromcommittingfutureviolations
of
Section17(a)
ofthe
ExchangeAct.Basedonthefactsandrepresentationsinyourletter,andassumingtheCompanyandtheFirmcomplywiththeFinalJudgment,theCommission,pursuanttodelegatedauthorityhasdeterminedthattheCompanyhasmadeashowing
of
goodcauseunderRule405(2)and
that
theCompanywill
not
beconsideredanineligibleissuer
by
reason
ofthe
entry
of
theFinalJudgment.Accordingly,thereliefdescribedabovefromtheCompanybeinganineligibleissuerunderRule405
of
theSecurities
Act
isherebygrantedandtheeffectiveness
of
suchreliefisas
of
thedate
of
theentry
of
theFinalJudgment.
Any
differentfactsfromthoserepresented
or
non-compliancewiththeFinalJudgmentmightrequireustoreachadifferentconclusion.Sincerely,
Q ~
C f . J ~ , / , -
/ f c > ~ a t h a n
A.
IngramDeputy
Chief
CounselDivision
of
CorporationFinance
 
SULLIVAN
&
CROMWELLLLP
TELEPHONE:
1-212-558-4000
FACSIMILE:
1-212-558-3588
WWW.$ULLCROM.COM
MaryKosterlitz,Esq.,
Chiefof
theOffice
of
EnforcementLiaison,Division
of
CorporationFinance,U.S.SecuritiesandExchangeCommission,100F.Street,N.E.,Washington,D.C.20549.
125
f?JJ/}qxuf
c?t'Md
flew
~ j t k ~
Jf!'??/10001;-21;.98
LOS
ANGELES·
PALO
ALTO.
WASHINGTON,
D.C.
FRANKFURT.LONDON.
PARIS
BEIJING·
HONG
KONG·
TOKYO
MELBOURNE.
SYDNEY
July15,2010Re:SECv.Goldman,Sachs
&
Co.andFabriceTourre(S.D.N.Y.2010)
Dear
Ms.Kosterlitz:
We
arewritingonbehalf
of
ourclient,theGoldmanSachsGroup,Inc.("GSGroup"),anditssubsidiary,Goldman,Sachs&Co.(the"Firm"),whichisasettlingdefendantintheabove-captionedcivilaction(the"Action")broughtbytheSecuritiesandExchangeCommission(the"Commission")intheUnitedStatesDistrictCourtfortheSouthernDistrict
of
NewYork(the"Court").TheActionrelatestoallegedviolations
of
thefederalsecuritieslaws
by
the
Firm
inconnectionwiththesale
of
syntheticcollateralizeddebtobligationstotwoinstitutionalinvestors.GSGroupherebyrequests,pursuanttoRule405undertheSecuritiesAct
of
1933(the"SecuritiesAct"),thattheDivision
of
CorporationFinance,
on
behalf
of
theCommission,determinethatGSGroupshallnot
be
consideredan"ineligibleissuer"asdefinedinRule405asaresult
of
the
judgment
tobeenteredintheAction,asdescribedbelow.GSGrouprequeststhatthisdetermination
be
madeeffectiveuponentry
of
thatjudgment.
It
is
our
understandingthattheDivision
of
Enforcementsupports
our
requestforsuchadetermination.
 
MaryKosterlitz,Esq.
BACKGROUND
-2-Theconduct
of
the
Firm
allegedinthecomplaintintheActioninvolvedanoffering
of
asyntheticcollateralizeddebtobligation,whichreferencedaportfolio
of
syntheticresidentialmortgage-backedsecurities,toqualifiedinstitutionalbuyersinrelianceontheexemptionfromregistrationundertheSecuritiesActprovidedbyRule144Athereunderandtonon-U.S.personsinreliance
on
thesafeharborfromregistrationprovided
by
RegulationSthereunder.Specifically,thecomplaintallegedthattheofferingmaterials,indescribingthePortfolioSelectionAgentfortheportfolio
of
syntheticresidentialmortgage-backedsecurities,shouldhavedisclosedthatthehedgefundassumingtheshortside
of
thetransactionhadplayedaroleintheselectionprocess.Initsconsenttothejudgment(describedbelow),the
Firm
acknowledgedthatitwasamistakenottodisclosetherole
of
thehedgefund.Inconnectionwiththeabove-captionedproceeding,the
Firm
andtheDivision
of
EnforcemcnthavereachedanagreementinprincipletosettletheActionasdescribedbelow,andtheFirmhasexecutedaconsenttotheentry
of
a
judgment
by
theCourt(the"Judgment")withoutadmitting
or
denyingthematterssetforthintheCommission'scomplaintintheAction(exceptastothejurisdiction
of
theCourt).IntheJudgment,theCourtwillpermanentlyrestrainandenjointhe
Firm
l
fromviolatingSection17(a)
of
theSecuritiesActintheoffer
or
sale
of
anysecurity.
The
Judgmentwillalsodecreethatthe
Firm
isliablefordisgorgement
of
$15millionandacivilpenaltyintheamount
of
$535million.Finally,theJudgmentwillrequiretheFirmtocomplywithcertainundertakingsrelatingto(i)thevettingandapprovalprocessforofferings
of
residentialmortgage-relatedsccurities,(ii)review
of
marketingmaterialsusedinconnectionwithresidentialmortgage-relatedsecuritiesofferings
by
the
Firm's
LegalDepartmentandComplianceDepartment,(iii)annualinternalaudits
of
thereview
of
suchmarketingmaterials,(iv)wherethefirmistheleadunderwriter
of
anoffering
of
residentialmortgage-relatedsecuritiesandretainsoutsidecounseltoadviseontheoffering,review
of
therelatedofferingmatcrialsbyoutsidecounseland(v)educationandtraining
of
personsinvolvedinthestructuring
or
marketing
of
residentialmortgagerelatedsecuritiesofferings.Theinjunctionwillalsoapplytothe
Firm's
agents,servants,employees,attorneysandallpersonsinactiveconcert
or
participationwiththemwhoreceiveactualnotice
of
theJudgment.

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