Today, the SEC announced that Goldman, Sachs & Co. will pay $550 million and reform its business practices to settle SEC charges that Goldman misled investors in a subprime mortgage product. In addition to the $550 million payment, the consent agreement provides for a permanent injunction from violations of the antifraud provisions of the Securities Act of 1933, and also requires certain other actions by Goldman.
According to the terms of the settlement, of the $550 million to be paid by Goldman, $250 million would be returned to harmed investors and $300 million would be paid to the U.S. Treasury. In addition, the settlement requires remedial action by Goldman in its review and approval of offerings of certain mortgage securities and additional education and training of employees in this area of the firm's business. In the consent agreement, Goldman acknowledged “it was a mistake for the Goldman marketing materials to state that the reference portfolio was ‘selected by’ ACA Management LLC without disclosing the role of Paulson & Co. Inc. in the portfolio selection process and that Paulson's economic interests were adverse to CDO investors. Goldman regrets that the marketing materials did not contain that disclosure.” The settlement is subject to court approval.