Goldman Adds Structured Note Value Disclosure After SEC Request

Goldman Sachs Group Inc. (GS) has begun disclosing its own valuations for structured notes in offering prospectuses, after the U.S. Securities and Exchange Commission recommended that banks include such an estimate.

The U.S. regulator advised banks to add “fair value” disclosures in a letter to lenders it didn’t identify that was posted on its website April 13.

“We believe issuers should consider prominently disclosing the difference between the public offering price of the note” and the fair value estimated by the issuer or its affiliate, the SEC said in its April letter.

In a May 15 offering from Goldman Sachs of “Absolute Return Knock-Out Notes,” the bank wrote that the securities are “equal to approximately $960 per $1,000” note issued. A similar May 4 deal lacked such details, instead using language that the price received for the notes may be “significantly less than the original issue price,” according to prospectuses filed with the SEC.

The bank’s earliest use of valuation estimates was in mid- May, according to a search of SEC records online.

Tiffany Galvin, a New York-based spokeswoman, declined to comment.

The U.S. structured-note industry has come under scrutiny from regulators for the securities’ complexity and lack of transparency. Banks sold $45.9 billion of SEC-registered securities in 2011, down from a record $49.5 billion a year earlier, according to data compiled by Bloomberg.

The SEC, which requested a written reply to its letter within 10 days, also asked the issuers to explain how they set up a secondary market for the notes, how they use the proceeds raised from sales and how important the business is to their funding needs.

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To contact the editor responsible for this story: Alan Goldstein at

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