Is Goldman Sachs suddenly becoming more transparent?
In a potentially damaging revelation, Goldman Sachs disclosed today that the firm's Fundamental Strategies Group may have shared investment ideas with Goldman's proprietary trading group or an undisclosed number clients before passing along those same tips to other clients, reports the New York Times' Dealbook column.
The disclosure comes on top of federal probes of Goldman's trading huddles, in which the firm's research analysts sometimes shared short-term trading tips with traders and key clients that differed from the Goldman's long-term research offered to many of the firm's other customers.
Last August, the Wall Street Journal reported:
Examiners at the Financial Industry Regulatory Authority, the industry self-regulatory body known as Finra, and the Securities and Exchange Commission intend to ask Goldman for more information on these weekly get-togethers, people familiar with the matter said.
In the latest revelation, a senior Goldman executive sent an e-mail to clients on Tuesday to disclose the activity, reports Dealbook's Andrew Ross Sorkin:
"We may trade, and may have existing positions, based on trading ideas before we have discussed those trading ideas with you," Thomas Mazarakis, head of Goldman's Fundamental Strategies Group, wrote.
Another practice at the firm that may draw the attention of federal regulators, as suggested by Sorkin, is Goldman's creation and selling "of bundles of mortgages known as collateralized debt obligations, while at the same time selling them short."
The practice was widely documented in a series of articles by McClatchy, which reported that Goldman sold some $40 billion worth of risky mortgage derivatives to its clients, while secretly betting against the housing market in its own trades.
As is their general policy, spokespersons at the SEC and FINRA would not confirm or deny to Huffington Post the existence of any investigations into the activity.