Kansas reaches $800K Settlement with Goldman Sachs
The office of Kansas’ securities commissioner, Marc Wilson, announced Friday that the state has reached an $800,000 settlement with Goldman, Sachs & Co.
The settlement was in conjunction with an auction rate securities investigation, based on claims the firm misled Kansas investors about auction rate securities.
“This settlement sends a strong message to Goldman Sachs and other Wall Street firms that Kansas investors demand integrity from securities dealers,” Wilson said in a news release. “Full and truthful disclosure is a cornerstone without which markets cannot function. If firms do not meet these high standards, we will take action on behalf of Kansas investors.”
Goldman Sachs is one of the ownership entities behind Hawker Beechcraft Corp. in Wichita. Hawker was acquired by GS Capital Partners, an affiliate of Goldman Sachs and Onex Partners in 2007 for $3.3 billion.
The state’s press release about the settlement, along with settlement totals from 11 other similar cases dating back to June 2009, can be seen here.
Kansas Securities Commissioner reaches settlement agreement with Goldman, Sachs & Co., Other Wall Street GiantsFor immediate release
October 29, 2010.... . . .“This settlement sends a strong message to Goldman Sachs and other Wall Street firms that Kansas investors demand integrity from securities dealers,” said the Commissioner. “Full and truthful disclosure is a cornerstone without which markets cannot function. If firms do not meet these high standards, we will take action on behalf of Kansas investors.”
During the investigation, regulators discovered that the firm’s securities dealers failed to adequately inform customers and train employees on the risks associated with purchasing ARS. Although marketed and sold to investors as safe, liquid and cash-like investments, ARS are actually long-term investments. They are subject to a complex auction process that failed in early 2008 when the firms marketing ARS stopped providing liquidity to the market. Investors not only saw lower returns, but they were also unable to access their money for current needs.
“At critical times, Kansas investors and small businesses were not able to access their own money, and that is completely unacceptable,” said the Commissioner. “It is our hope these things never happen, but when abuses like this occur our job is to be the advocate for Kansas investors and level the playing field.”
The settlement also obligates Goldman Sachs to other remediation for investors. The fine paid by the firm will be placed in the Kansas Investor Education Fund. The fund gives grants to organizations which provide fraud prevention and financial literacy services and otherwise helps KSC carry out its investor education legislative mandate.
The Office of the Kansas Securities Commissioner has also reached settlement agreements with 11 other firms in similar cases, with fines totaling more than $5.9 million. These previous settlements made their way to the State General Fund.
The settlements were negotiated by multi-state task forces of state securities regulators under the auspices of the North American Securities Administrators Association (NASAA). . . .
Read the full report here