A FINRA arbitration panel has ordered New York-based Goldman Sachs & Co. to pay approximately$2.5 million to an investor who alleged the brokerage firm recommended an unsuitable investment, the Goldman Sachs Special Opportunities Fund. The arbitrators found that the documentation for the Special Opportunities Fund was defective and that Goldman Sachs had failed to supervise the transaction properly. This case is typical of many recent investment fraud cases, where the investment product itself was faulty or flawed, rather than one in which a specific stockbroker personally acted with intent to harm the investor. Such product cases give rise to claims that could be brought by every investor who bought the flawed product.
The U.S. Commodity Futures Trading Commission (CFTC) has fined Goldman, Sachs & Co. ("Goldman") $1.5 million to settle CFTC charges that Goldman failed to diligently supervise an employee and have proper supervisory and compliance systems in place in late 2007.
In 2007, Goldman Sachs sold its collateralized debt obligation package. These obligations were tied to subprime mortgages. An investor filed a lawsuit against Goldman Sachs, accusing the firm of making misleading statements regarding ethical standards. The firm's actions are back under the microscope because a federal district judge refused to dismiss the investor's lawsuit.
A jury convicted Rajat Gupta, a former Goldman Sachs director, of conspiracy and three counts of securities fraud, loosely tied to the October 2011 insider trading conviction of Raj Rajaratnam, founder of the $7 billion Galleon hedge fund.
On September 21, 2011, the Securities and Exchange Commission ("SEC") charged a former Goldman, Sachs & Co. employee and his father with insider trading based on confidential information about Goldman's trading strategies and intentions that the Goldman employee learned while working on Goldman's exchange-traded funds (ETF) desk.
It has been reported that Goldman Sachs often has sold its own holdings in stocks that it had included on its "Conviction Buys" list. That is, at same time that Goldman Sachs analysts recommended that investors buy certain stocks, Goldman Sachs was selling its own holdings of many of those very same stocks. For example, it was reported that Goldman Sachs sold 1,260,802 shares of Apple (symbol: AAPL) when its research division had a "buy" rating on the stock and maintained a lofty $470 price per share target.