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.

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  1. NOTaREALmerican

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

  2. Tao Jonesing

    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.

    1. Bill

      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.

  3. Ishmael

    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.

    1. Yves Smith Post author

      Yes, I corrected the post. The stock moved between 3:26 PM and 3:36 PM (I had a typo, my notes are correct, but the post said 3:36 PM earlier).

      There is also apparently a report at Real Money (I can’t locate it, perhaps someone can verify) there were big purchases of out of the money calls expiring tomorrow in advance of the announcement as well.

    2. RueTheDay

      3:44 was the earliest release I could find by searching Yahoo Finance.

      The stock was definitely moving before the announcement, but not that long before.

  4. m.jed

    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.

  5. Ishmael

    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.

  6. Doug Terpstra

    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.

  7. monday1929

    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.

  8. Blurtman

    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?

  9. Blurtman

    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?

  10. stefanie

    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.

    1. Blurtman


      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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