Thursday, July 15, 2010

Is the SEC Going to Investigate Insider Trading on Goldman Settlement News?

Goldman’s stock was trading at $140.15 at 3:26 PM today.

It moved more than 4 points in the next ten minutes.

I got wind that the settlement announcement was set for 4:45 PM at around 4:00 PM. I pinged a journalist at a major financial media outlet to find out whether there had been an announcement to the media earlier. His impression was also that the news had hit the wires at 4:00 PM (thus presumably intended for the close of trading).

So….it’s insider trading only if you are an insider…but who let the cat out of the bag at 3:30 PM, and were they an insider? This sort of thing happens all the time, but it’s particularly brazen when it involves and SEC announcement. But how likely is it that the SEC will turn over this rock to see what crawls out from under it?

Update: One media source indicated he saw a “rumor” of an announcement on Twitter roughly when the stock moved…which was then confirmed.

More on this topic (What's this?)
Outrage over Goldman Sachs Settlement (Red Hot Energy and Gold - Global..., 7/20/10)
Did Goldman Sachs Pick Your Pocket? (Red Hot Energy and Gold - Global..., 6/30/10)
Thoughts on a crazy end of day (BP, GS, GOOG) (Intelligent Speculator, 7/16/10)
Read more on Goldman Sachs Group, Insider Trading at Wikinvest

Topics: Banana republic, Banking industry, Investment management, Legal, Regulations and regulators

Email This Post Email This Post Posted by Yves Smith at 6:45 pm

17 Comments » Links to this post

17 Comments:

  • NOTaREALmerican says:
    July 15, 2010 at 6:56 pm

    The vassals at the SEC have to get paid somehow. Cut-em some slack on this one.

  • Tao Jonesing says:
    July 15, 2010 at 7:27 pm

    FINRA (not the SEC) will investigate, but they’ll find nothing actionable enough to dig deeper. That’s the way it works.

    In any event, if there was a leak, it was from the SEC, not GS. You will not find anybody from GS benefiting directly or indirectly by trading before the news. The hedge fund guys are really good at being gadflys at administrative agencies.

    • ndk says:
      July 15, 2010 at 7:38 pm

      Mary Schapiro is from FINRA. And her COO, the Taoatly Awesome Adam Storchness lol, is from Goldman. I just wonder whether either of them is as conversational as Google’s McLaughlin and others at the OSTP are.

    • Bill says:
      July 15, 2010 at 10:17 pm

      Yeah, it’s like when I worked for the military, they’d make a big show of mounting an investigation, then several months later when everyone had forgotten (except the victims), they’d announce the investigation completed with “no findings of wrongdoing”……….bureaucratic SOP.

  • RueTheDay says:
    July 15, 2010 at 7:41 pm

    Market Watch reported the upcoming SEC announcement at 3:44 -
    http://www.marketwatch.com/story/sec-plans-significant-announcement-goldman-up-2010-07-15?siteid=yhoof2

    It wasn’t certain it was about Goldman, though it speculated it was.

    I can’t find anything from around 3:30 when the stock started to take off.

  • Ishmael says:
    July 15, 2010 at 7:48 pm

    RueTheDay has it correct. I saw the announcement on CNBC just about the time the market took off. The other thing that happened was breaking news on the BP well. These two items happened at exactly the same time and approximately at 3:30. It is hard to tell exactly which started the market up first, but I can assure you I knew of the Goldman settlement by 3:45 and that there would be no guilty plea.

  • m.jed says:
    July 15, 2010 at 8:32 pm

    Mike Mayo, a fairly prominent sell-side analyst, came out with a report before the announcement of the SEC press conference saying Goldman may settle with the agency in short order after FinReg passed, as early as next week, which started the stock moving. Also Bloomberg news had a snippet, “SEC says it will make significant announcement” that hit no later than 3:31 EST.

    The WSJ article this AM gave greater credibility to these rumors and thus more impact than they would have had in isolation.

  • Ishmael says:
    July 15, 2010 at 10:14 pm

    One other point that someone else brought to my attention. Tomorrow is option expiration which was one of the reasons I was out of the market this afternoon.

    There has been a pattern in the past of surprise announcements coming out of the government one way or the other the day before option expiration. That happened to me in August 2007.

    These announcement have a habit of helping the big institutions. Before the announcement it looked like the big money was going to have to pay out tomorrow and then wham out of no where was the announcement that the SEC had a big press release after the market closed. Guess what the market rallied in the last half hour and saved the Street — again.

    This is far scarier than a minor leak of insider information. The government teams with the big wall street firms to rip off the poor investors.

  • Doug Terpstra says:
    July 15, 2010 at 10:37 pm

    I’m shocked…shocked…round up the usual suspects.

    It must have been a fat-finger, HFT computer. Yeah, yeah, that’s the ticket, it was skynet.

  • monday1929 says:
    July 16, 2010 at 12:25 am

    Is anyone aware of what happened to the investigation of the last minute listing/purchasing of the far out of the money Bear Stearns Puts days before the implosion?
    That is one smoking smoking gun.

  • Blurtman says:
    July 16, 2010 at 3:22 am

    Does anyone know if Hank Paulson was the head of Goldman Sachs when the company committed this fraud on which they just settled?

    Wouldn’t it be bizarre if the USA had a recent Treasury Secretary who conmitted fraud?

  • Blurtman says:
    July 16, 2010 at 4:02 am

    A pretty damning indictment of Hank Paulson and his role in the creation of synthetic CDO’s while at Goldman Sachs. Also describes the importance of AIG in insuring this fraud. Apologies if this is old news.

    What kind of country has such a criminal as its Secretary Treasury?

    http://webcache.googleusercontent.com/search?q=cache:Fb2SUCTUtW8J:pubrecord.org/special-to-the-public-record/7521/congress-bring-goldman-sachs-expose/+ABACUS+CDO+hank+paulson&cd=10&hl=en&ct=clnk&gl=us

  • stefanie says:
    July 16, 2010 at 4:18 am

    Italy! Italy has an Under Secretary of Treasury who has been dismissed two days ago because of his Mafia connections. And Italy has a Prime Minister, Berlusconi, who has proven ties to the Mafia as well. The only reason he is not in prison is that he had all the relevant laws altered so he not only has immunity while in office, but all the trials against him are stalled. And his best friend and co-founder of his political party, Marcello dell’Utri was convicted of proven Mafia ties in Sicily and finally, after a nine year trial, goes to jail (or his appeal will be successful, and he doesn’t!) Maybe it would be a good idea if you all got your act together fast, in the US, and do something before your own government reaches that stage of ‘no return’. And I think a vital point in stopping what is going on in the political and financial power elites, and the ongoing destruction of the financial system is, find a way to get the message out to the people. How can they become more informed of what’s hitting them and destroys their lives.

    • Blurtman says:
      July 16, 2010 at 11:41 am

      Stefanie,

      Thank you for the encouraging(?) comparison. High crimes and influence peddling know no boundaries. I think most Americans (not the informed people who read Yves blog) have no idea what is happening. When things are so bad that even they undersstand, I hope it is not too late.

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