Goldman Said to Prohibit Investment Bankers From Buying Stocks
2014-09-27 04:00:03.3 GMT
By Michael J. Moore
Sept. 27 (Bloomberg) -- Goldman Sachs Group Inc., the top
adviser on corporate takeovers, is changing a policy addressing
conflicts of interest to bar investment bankers from trading
individual stocks and bonds, a person with direct knowledge of
the matter said.
Employees at the New York-based firm were notified
yesterday of the change, which takes effect immediately, said
the person, who requested anonymity because the matter isn’t
public. They also aren’t allowed to invest in activist or event-
driven hedge funds, the person said. Previously, bankers needed
approval before they could invest in individual stocks.
The change came on the same day that a former Federal
Reserve Bank of New York examiner’s recordings of her ex-
colleagues’ dealings with Goldman Sachs were featured in reports
by public radio and ProPublica. The former examiner, Carmen
Segarra, sued the New York Fed last year, alleging that she was
fired in 2012 because she refused to change her finding that
Goldman Sachs didn’t have a conflict-of-interest policy. Her
case was dismissed in April and she’s appealing.
The radio program “This American Life” released a
transcript of a broadcast that includes excerpts of
conversations it said were secretly recorded by Segarra. In the
transcript, Segarra described how she felt that her Fed
colleagues handled Goldman Sachs with kid gloves.
“What I was sort of seeing and experiencing was this level
of deference to the banks, this level of fear,” she said.
The New York Fed said it “categorically rejects”
Segarra’s allegations.
Financial Safety
“The New York Fed works diligently to execute its
supervisory authority in a manner that is most effective in
promoting the safety and soundness of the financial institutions
it is charged with supervising,” it said in a statement posted
on its website.
U.S. Senator Elizabeth Warren, a Massachusetts Democrat,
called for a congressional investigation into allegations that
the New York Fed was too deferential to the institutions it
regulated. Senator Sherrod Brown, an Ohio Democrat who’s also on
the banking committee, backed Warren’s call for a probe.
In 2012, a Delaware judge rebuked Goldman Sachs over its
“incomplete and inadequate” handling of a conflict of interest
in pipeline operator Kinder Morgan Inc.’s $21.1 billion purchase
of El Paso Corp., the investment bank’s biggest takeover
assignment the previous year. Stephen D. Daniel, a former
Goldman Sachs partner who was lead banker on the deal, failed to
disclose ownership of about $340,000 in Kinder Morgan stock, the
judge said.
Protecting Reputation
Yesterday’s change had been discussed for months and
tightens a policy that was adjusted after the Kinder Morgan
deal, the person said. The move is intended to reduce potential
conflicts with clients and protect the firm’s reputation, the
person said.
The new restrictions at Goldman Sachs also will apply to
some employees outside of investment banking, including those
who could have access to confidential information as part of
their roles, the person said.
Spokesmen for Bank of America Corp., Citigroup Inc. and
Morgan Stanley declined to comment on the policies at their
companies. A spokesman for JPMorgan Chase & Co., the biggest
U.S. bank by assets, didn’t respond to phone and e-mail messages
sent after regular business hours.
The case is In re El Paso Corp. Shareholder Litigation,
Consolidated 6949-CS, Delaware Chancery Court (Wilmington).
For Related News and Information:
Senator Warren Calls for Hearings on New York Fed Allegations
NSN NCJ0AC6S972E <GO>
What the Secret Goldman Sachs Tapes Uncover: Michael Lewis
NSN NCIISN6JTSEU <GO>
A Vivid Glimpse of the Fed’s Cozy Relationship With Goldman
NSN NCIQ6N3HHEDC <GO>
Goldman Criticized by Judge on Kinder Morgan Deal Conflicts
NSN M09Z630YHQ0X <GO>
Top Stories: TOP <GO>
Top Finance Stories: TOP FIN <GO>
Goldman Sachs Risk Profile: GS US <Equity> RSKC <GO>
--With assistance from Matthew Boesler, Hugh Son and Dakin
Campbell in New York and Kathleen Hunter in Washington.
To contact the reporter on this story:
Michael J. Moore in New York at +1-212-617-6919 or
mmoore55@bloomberg.net
To contact the editors responsible for this story:
Peter Eichenbaum at +1-212-617-5722 or
peichenbaum@bloomberg.net
Steven Crabill, Dan Reichl
2014-09-27 04:00:03.3 GMT
By Michael J. Moore
Sept. 27 (Bloomberg) -- Goldman Sachs Group Inc., the top
adviser on corporate takeovers, is changing a policy addressing
conflicts of interest to bar investment bankers from trading
individual stocks and bonds, a person with direct knowledge of
the matter said.
Employees at the New York-based firm were notified
yesterday of the change, which takes effect immediately, said
the person, who requested anonymity because the matter isn’t
public. They also aren’t allowed to invest in activist or event-
driven hedge funds, the person said. Previously, bankers needed
approval before they could invest in individual stocks.
The change came on the same day that a former Federal
Reserve Bank of New York examiner’s recordings of her ex-
colleagues’ dealings with Goldman Sachs were featured in reports
by public radio and ProPublica. The former examiner, Carmen
Segarra, sued the New York Fed last year, alleging that she was
fired in 2012 because she refused to change her finding that
Goldman Sachs didn’t have a conflict-of-interest policy. Her
case was dismissed in April and she’s appealing.
The radio program “This American Life” released a
transcript of a broadcast that includes excerpts of
conversations it said were secretly recorded by Segarra. In the
transcript, Segarra described how she felt that her Fed
colleagues handled Goldman Sachs with kid gloves.
“What I was sort of seeing and experiencing was this level
of deference to the banks, this level of fear,” she said.
The New York Fed said it “categorically rejects”
Segarra’s allegations.
Financial Safety
“The New York Fed works diligently to execute its
supervisory authority in a manner that is most effective in
promoting the safety and soundness of the financial institutions
it is charged with supervising,” it said in a statement posted
on its website.
U.S. Senator Elizabeth Warren, a Massachusetts Democrat,
called for a congressional investigation into allegations that
the New York Fed was too deferential to the institutions it
regulated. Senator Sherrod Brown, an Ohio Democrat who’s also on
the banking committee, backed Warren’s call for a probe.
In 2012, a Delaware judge rebuked Goldman Sachs over its
“incomplete and inadequate” handling of a conflict of interest
in pipeline operator Kinder Morgan Inc.’s $21.1 billion purchase
of El Paso Corp., the investment bank’s biggest takeover
assignment the previous year. Stephen D. Daniel, a former
Goldman Sachs partner who was lead banker on the deal, failed to
disclose ownership of about $340,000 in Kinder Morgan stock, the
judge said.
Protecting Reputation
Yesterday’s change had been discussed for months and
tightens a policy that was adjusted after the Kinder Morgan
deal, the person said. The move is intended to reduce potential
conflicts with clients and protect the firm’s reputation, the
person said.
The new restrictions at Goldman Sachs also will apply to
some employees outside of investment banking, including those
who could have access to confidential information as part of
their roles, the person said.
Spokesmen for Bank of America Corp., Citigroup Inc. and
Morgan Stanley declined to comment on the policies at their
companies. A spokesman for JPMorgan Chase & Co., the biggest
U.S. bank by assets, didn’t respond to phone and e-mail messages
sent after regular business hours.
The case is In re El Paso Corp. Shareholder Litigation,
Consolidated 6949-CS, Delaware Chancery Court (Wilmington).
For Related News and Information:
Senator Warren Calls for Hearings on New York Fed Allegations
NSN NCJ0AC6S972E <GO>
What the Secret Goldman Sachs Tapes Uncover: Michael Lewis
NSN NCIISN6JTSEU <GO>
A Vivid Glimpse of the Fed’s Cozy Relationship With Goldman
NSN NCIQ6N3HHEDC <GO>
Goldman Criticized by Judge on Kinder Morgan Deal Conflicts
NSN M09Z630YHQ0X <GO>
Top Stories: TOP <GO>
Top Finance Stories: TOP FIN <GO>
Goldman Sachs Risk Profile: GS US <Equity> RSKC <GO>
--With assistance from Matthew Boesler, Hugh Son and Dakin
Campbell in New York and Kathleen Hunter in Washington.
To contact the reporter on this story:
Michael J. Moore in New York at +1-212-617-6919 or
mmoore55@bloomberg.net
To contact the editors responsible for this story:
Peter Eichenbaum at +1-212-617-5722 or
peichenbaum@bloomberg.net
Steven Crabill, Dan Reichl