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Goldman Settles SEC Fraud Case for $550M

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By Jason Beahm on July 19, 2010 7:22 AM

Goldman Sachs Group and the U.S. Securities and Exchange Commission have settled the highest profile SEC fraud case, a $550 million settlement arising from the 2008 financial crisis and how Goldman marketed a subprime mortgage product. The settlement is the third largest SEC settlement ever made. The Los Angeles Times is reporting that the settlement gives each side a measure of what they needed in order to move on.

The SEC voted 3-2 to settle fraud charges with Goldman. The two Republican SEC commissioners, Troy Paredes and Kathleen Casy, voted against the settlement, Reuters reports. The same two commissioners also dissented when the SEC opted to file fraud charges against Goldman.

The settlement gives the SEC the an answer for those who say the government has not done enough to come down on Wall Street. It will also allow Goldman to move on, as the fine, while massive, can easily be paid by Goldman. Goldman made a profit of $13.4 billion last year alone. Goldman called the settlement "the right outcome for our firm, our shareholders and our clients."

Goldman was accused of misleading investors who bought subprime mortgage-backed securities. Goldman did not admit to any wrongdoing in the settlement, though it did admit to making mistakes. The settlement was received positively on Wall Street, with Goldman up 10%. A federal judge will still have to sign off on the settlement.

"It is a major victory for the SEC because you don't find other settlements in which the defendant admits it made materially misleading disclosure," said John Coffee, a Columbia University securities-law professor.

The settlement is also good news for investors, $250 million of the settlement will go to investors. The SEC still has an ongoing suit against Goldman Vice President Fabrice Tourre.

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