Financial Services Authority Begins Investigation of Goldman Sachs

The Financial Services Authority (FSA), the market watchdog in the UK, will begin a formal enforcement investigation into Goldman Sachs (GS) in the wake of the recent action by the Securities and Exchange Commission (SEC). Last week, the SEC charged Goldman for allegedly defrauding investors in a financial product tied to subprime mortgages. The SEC alleges Goldman and Fabrice Tourre, a vice president in the firm, misled and even omitted key facts about a synthetic collateralized debt obligation (CDO), ABACUS 2007-AC1. Over the weekend, UK Prime Minister Gordon Brown called for the FSA to look into the matter. “I want a special investigation done into the entanglement of Goldman Sachs and the companies there with other banks and what happened,” Brown said on BBC television Sunday. “There are hundreds of millions of pounds have been traded here and it looks as if people were misled about what happened. I want the Financial Services Authority (FSA) to investigate it immediately.” The FSA stated today it would be liaising closely with the SEC in this review. A spokesperson for the German government told a newspaper there that it too would seek information from the SEC before it takes its own legal steps. As the civil cases mount from around the world, private companies could betaking action as well. The Wall Street Journal reported American International Group (AIG) is considering potential claims against Goldman and other banks for its heavy losses on deteriorating mortgage assets. A spokesperson for AIG said the firm is not commenting on the report. Amid the litigation, Goldman gained early in 2010. The investment bank reported a $3.46bn net income for Q110. Write to Jon Prior.

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