Goldman Sachs Group Inc. met regulators from the U.K. Financial Services Authority today to formally discuss how the agency’s probe into the bank will progress, two people familiar with the investigation said.
It was the first time Goldman Sachs and the agency met to discuss the timetable of the probe, the people said, on condition of anonymity because the inquiry is confidential. The regulator has a duty to meet with firms it is investigating at an early stage to outline what will happen during the probe.
The FSA said earlier this month that it was investigating Goldman Sachs’ London office after the U.S. Securities and Exchange Commission filed a lawsuit over the New York-based bank’s marketing of a collateralized debt obligation. Prime Minister Gordon Brown, facing a May 6 election, called on the FSA to investigate after the SEC suit.
A spokeswoman for Goldman Sachs in London and FSA spokesman Chris Hamilton both declined to comment. Sky News first reported the meeting today.
The bank may be fined or individuals banned if the FSA finds a breach of its rules. A Goldman Sachs vice president named in the SEC case, Fabrice Tourre, is employed at the bank’s London office. His FSA authorization was suspended at the firm’s request.
Goldman Sachs executives, including Chief Executive Officer Lloyd Blankfein, were questioned by a U.S. Senate Subcommittee earlier this week over the bank’s marketing of CDOs, which the SEC alleges was fraudulent. Goldman Sachs denies the allegations and has said it will fight the suit.
Tourre was also questioned at the Senate hearing. He started working at the London office in November 2008, according to the FSA’s register, and the SEC’s allegations relate to when he worked in New York.
The French markets regulator, the Autorite des Marches Financiers, said today it found no evidence that local fund- management companies bought the CDO, known as Abacus 2007-AC1, which is the subject of the SEC lawsuit. Germany’s BaFin regulator said this month it will seek information from the SEC about the case.
German and British banks both lost money because of the fraud, according to the SEC suit. The Royal Bank of Scotland Group Plc, majority-owned by U.K. taxpayers, unwound a position in Abacus bought by its ABN Amro unit by paying Goldman Sachs $840.9 million, the SEC said. Germany’s IKB Deutsche Industriebank AG lost nearly all of its $150 million investment in the CDO, according to the SEC.
CDOs bundle bonds or loans, or both, from a variety of issuers, such as companies or countries. Interest payments on the underlying bonds or loans are used to pay investors.
To contact the reporters on this story: Caroline Binham in London at firstname.lastname@example.org