Goldman Sachs hit by British probe

20th April 2010, Comments 0 comments

Britain's financial regulator launched a formal investigation into Wall Street giant Goldman Sachs on Tuesday, in relation to US fraud charges that were filed against the bank last week.

"Following preliminary investigations the FSA has decided to commence a formal enforcement investigation into Goldman Sachs International in relation to recent SEC allegations," the Financial Services Authority said.

"The FSA will be liaising closely with the SEC in this review," it added in a brief statement issued on the same day as Goldman's first-quarter earnings.

In reaction, Goldman pledged to cooperate with the British probe following US fraud charges which it again dismissed as "unfounded".

"We believe the SEC's charges are completely unfounded in law and fact, and look forward to cooperating with the FSA," the bank said in a statement emailed to AFP.

The US Securities and Exchange Commission (SEC) filed charges against Goldman last week over the sale of a type of complex mortgage product blamed for the financial meltdown.

Hours after the FSA announcement, the embattled US investment firm posted soaring first-quarter profits of 3.46 billion dollars (2.56 billion euros).

The British probe also comes just days after Prime Minister Gordon Brown blasted Goldman Sachs over what he called its "moral bankruptcy".

Brown, whose Labour Party is battling to hold onto power at a general election due on May 6, had Sunday said the US charge against Goldman underlined the need for more reform of the international banking system.

The Sunday Times newspaper reported over the weekend that Goldman was planning to pay staff a bonus pool worth 3.5 billion pounds (4.0 billion euros, 5.3 billion dollars) for work achieved in the first quarter of this year.

"I am shocked at this moral bankruptcy. This is probably one of the worst cases that we have seen," Brown told BBC television on Sunday.

He added: "It makes me absolutely determined we are going to have a new global constitution for the banking system which I am pressing for, a global financial levy for the banks, and we quash remuneration packages."

Brown said he believed he was the right person "to deal with these problems of the banks and to challenge them about the way they behave in the future".

Regarding the alleged happenings at Goldman Sachs, he added: "Hundreds of millions of pounds have been traded here and it looks as if people were misled about what happened."

Brown said banks were a "risk" to the economy. "We have got to make sure they behave in a proper way," he insisted.

The SEC has accused Goldman Sachs of "defrauding investors by misstating and omitting key facts" about the product that was based on subprime mortgage-backed securities. The bank employs around 5,500 staff in London.

© 2010 AFP

0 Comments To This Article