Congress to quiz SEC on private-share tradingRead the entire article here
By Sarah N. Lynch - Reuters (Washington) May 10, 2010
(Reuters) - U.S. rules on the trading of private securities will be the subject of a hearing on Tuesday by lawmakers concerned that the regulations may be stifling the formation of capital.Goldman Sachs, in a high-profile case, was spooked into limiting an offering of Facebook shares in January to foreign investors out of fear that a sale of the private shares to U.S. customers would violate the rules.
Securities and Exchange Chairman Mary Schapiro and SEC corporation finance director Meredith Cross will appear together at the House Oversight Committee after its chairman, Darrell Issa, questioned whether U.S. rules governing the trading of private shares are outdated and hinder the creation of capital.
The SEC is analyzing whether its rules for private-share issuances are still relevant in an era of buzzed-about offerings, complex investor pools, and online trading platforms that allow investors to quickly swap hot tech company shares.
Schapiro has not said when or how the SEC may modernize these rules, which have prompted cash-hungry companies such as Google to go public and have dictated how investors can get an early piece of the action.
The SEC is also monitoring the lightly regulated world of private-company share trading on online platforms such as SecondMarket and SharesPost. SecondMarket confirmed in January it had received a request from the SEC for information, and its chief executive, Barry Silbert, will be also be on hand to testify Tuesday.
The trading of private shares has featured prominently in the media lately as Wall Street banks and electronic markets seek to offer investors a chance to actively trade stakes in hot technology companies such as Facebook, Zynga and Twitter before they go public.
Goldman had planned to offer U.S. investors a chance to buy Facebook shares but ultimately opted only to sell the shares to foreign investors because of intense media coverage of the deal.
Although the SEC did not ask Goldman to limit its offering, Goldman was concerned the media coverage could have violated a general solicitation ban for private offerings that is intended to protect investors.
The Goldman-Facebook deal also drew attention to another old rule on the books that determines when a company must go public.
Under current regulations, companies must begin filing regular financial disclosures if they exceed 500 shareholders of record. But Goldman Sachs had found a legal way to get around this rule by using a special purpose vehicle that aggregated investors into one.
Schapiro has said the SEC is looking at these rules to see if they should be modernized, and that the SEC is also examining whether regulatory relief should be available for a new capital raising strategy known as "crowdfunding" in which a group of people pool their money together to invest in a business opportunity.
In addition she added that the SEC is reviewing the electronic trading of private shares, noting in a letter to Issa that these platforms raise concerns that the "pricing of securities may be influenced by conflicted market participants who may be buying and selling for their own account as well as facilitating transactions" for others.
On Tuesday, Issa is expected to raise concerns about the outdated rules and whether they are impeding capital formation.
Tuesday, May 10, 2011
Goldman Sachs: the Many-Headed Hydra
There are many ways a bank like Goldman Sachs can get its own way. Goldman Sachs can lobby politicians for tax breaks, protection and contracts. Or Goldman Sachs may find its own people in positions of power where they can influence financial decisions made at the highest level. Sometimes politicians themselves help to promote rules and regulations that are favorable to certain organizations. At present, the SEC is looking at "modernizing" certain rules that govern companies such as Facebook who have to publicly disclose their finances when more than 500 shareholders buy in. Darrell Issa, House Oversight Committee Chair, is concerned that such rules may be "impeding capital formation" as related in the article below:
Goldman Sachs Sued By Citizens
Image via WikipediaA California couple, Nancy and Derek Casady, are suing A.I.G., Goldman Sachs and Deutsche Bank over two federal loans.We all talk about the fraud on Wall Street, The Federal Reserve and even many of our politicians. But all we do is talk - present company included. But here are a couple of citizens who stopped talking and took action to back up their beliefs. My hat's off to them.
In a story reported in the New York Times on line edition (NYT.com) - Claiming Fraud in A.I.G. Bailout, Whistle-Blower Lawsuit Names 3 Companies by MARY WILLIAMS WALSH - a California couple, Nancy and Derek Casady, are suing A.I.G., Goldman Sachs and Deutsche Bank. This is a story worthy of repeating.
The first known whistle-blower lawsuit to assert that the taxpayers were defrauded when the federal government bailed out the American International Group was unsealed on Friday, joining a number of suits seeking to settle the score on losses related to the financial crisis of 2008.
The lawsuit, filed by a pair of veteran political activists from the La Jolla area of San Diego, asserts that A.I.G. and two large banks engaged in a variety of fraudulent and speculative transactions, running up losses well into the billions of dollars. Then the three institutions persuaded the Federal Reserve Bank of New York to bail them out by giving A.I.G. two rescue loans, which were used to unwind hundreds of failed trades.Fraud, as the definition at the top of the page says, is an illegal activity. In my way of thinking, an illegal activity is against the law and anything done that is against the law is punishable by law. That is of course, if those charged with upholding our laws act according to their delegated duties and responsibilities.
The loans were improper, the lawsuit says, because the Fed made them without getting a pledge of high-quality collateral from A.I.G., as required by law.
Indeed. those charged with the responsibility do not discharge their duties "according to the law" then they themselves may be operating illegally and should be subject to punishment themselves.
The evidence of fraudulent activities by Goldman, A.I.G., Deutsche Band and all the other bands of merry banksters has been brought to the forefront for over three years now yet nothing meaningful has ever been done. While I also believe in the basic rule of law that everyone is presumed innocent until proven guilty, the concept of prosecuting a criminal case where there is sufficient evidence to do so, is also a duty our justice system must employ.
“To cover losses of those engaged in fraudulent financial transactions (emphasis added) is an authority not yet given to the Fed board,” said the plaintiffs, Derek and Nancy Casady, in their complaint, filed in Federal District Court for the Southern District of California."Fraudulent financial transactions...." evidence of which we have seen, heard and read about for years. There should be sufficient evidence to take action.
Senior Fed officials have stated repeatedly that they had to take unusual steps in 2008 because the global financial system was close to breaking down. The Casadys’ lawyer, Michael J. Aguirre, argued that even so, the Fed was required to comply with its own governing statutes. He said that when the Fed bailed out a nonbank, it was required to secure the loan with the same liquid, high-quality collateral it required when lending to a troubled bank.While the Fed was not named as a defendant in the law suit, this above the law, privately held and secretive company has much to answer for as well. Perhaps this law suit will bring out the seemingly illegal actions they took and open the door to not only audit them but to investigate them as well. We need to take a closer look at those in charge like Timothy Geithner and his actions while President of The New York Federal Reserve Bank. We need to take a closer look at the actions of Henry Paulson, former CEO of Goldman Sachs while he was Secretary of the Treasury during this financial crisis. Both men seemingly condoned the actions of these financial institutions who caused our Great Recession and aided and abetted their actions using taxpayer money to coverup their schemes and possible fraudulent activities.
A spokesman for A.I.G., Mark Herr, said the Casadys’ lawsuit was “devoid of merit” and said Mr. Aguirre appeared to be recycling old and discredited legal theories.Not a surprising comment from A.I.G. who was one of the major beneficiaries of all of these questionable activities.
Not surprising either is the following comment:
A spokesman for Goldman Sachs said he was not familiar with the Casadys’ lawsuit and could not comment on it. A spokeswoman for Deutsche Bank declined to comment.The basis of the law suit is explained as follows.
The Casadys’ lawsuit says the resulting law needs judicial review because it went flying through Congress with little debate and now appears to be feeding high-risk behavior. Investors in nonbanks now expect that the Fed will open a safety net to catch them, should they falter, the suit contends.Our country needs more people like the Casaday's. We all need to rally behind them in their quest for justice.
“Congress did not show a legislative intent to convert the Federal Reserve into a bank for bailing out failed speculators,” the complaint asserts.
Read the full article...click here
Goldman Sachs In The News - May 9, 2011
By Tonya Garcia
Goldman Sachs CEO Lloyd Blankfein is cordial but sniffly - Yahoo ...
By Lauren Tara LaCapraJERSEY
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U.S. Probes Goldman Sachs Findings After Senate Referral
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For the $140 million second lien, Goldman Sachs Group Inc. was syndication agent
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