Instant View: UK regulator opens Goldman Sachs probe

LONDON (BestGrowthStock) – Britain’s Financial Services Authority (FSA) on Tuesday opened an investigation into Goldman Sachs, days after U.S. regulators filed a fraud case against Wall Street’s biggest investment bank.

The U.S. Securities and Exchange Commission has accused Goldman of hiding from investors the fact that a prominent hedge fund manager was betting against a subprime mortgage product that he helped create.

MICHAEL TURNER, HEAD OF GLOBAL STRATEGY, ABERDEEN ASSET MANAGEMENT

“Certainly I think the FSA are taking a harder stance on in general in terms of market abuse. Whether it becomes a regular occurrence or not? It may well do … The banking crisis was such a shock to political authorities that there’s going to be much, much more regulatory scrutiny.

“The regulatory stance on what you can and cannot do within markets will change … I think the authorities will be much more aware of the disorder that can occur in markets when these things are left.”

JOANNE SEGARS, CHIEF EXECUTIVE OF THE UK NATIONAL ASSOCIATION OF PENSION FUNDS (NAPF)

“It is appropriate for the FSA, as a financial regulator, to formally investigate banks and other financial institutions if it feels it is a case to answer. In the light of the financial crisis transparency in the financial system is an essential factor in restoring public trust.

“Financial institutions are coming under more scrutiny, whether from the regulator or from investors such as pension funds.

HARVEY KNIGHT, HEAD OF UK FINANCIAL SERVICES PRACTICE AT LAW FIRM WITHERS AND FORMER FSA SENIOR LAWYER

“Now that the FSA has launched a formal enforcement allegation against Goldman Sachs, it seems that the SEC’s action in filing fraud charges against Goldman Sachs has fired the starting gun on a wave of regulatory actions relating to collateralized debt obligations (CDOs).”

DAVID BUIK, SENIOR PARTNER, BGC PARTNERS

“I have my doubts about this attack on Goldman Sachs, for the simple reason that with two members of the SEC clearly against the indictment, it doesn’t make Mary Schapiro’s job any easier. Also, the fact is that if every single investment bank, plus Fannie Mae, Freddie Mac and AIG are dragged into court for litigation when the world is trying to recover, wouldn’t it be better to sort out the regulatory requirements than go on a witch hunt?

“People seem to forget that (Goldman) has done huge work for the UK and American governments. The UK government have used Goldman Sachs over the past 10 years more than any of the other banks. I have my doubts whether these allegations will be proven.”

LONDON BASED LAWYER, ON CONDITION OF ANONYMITY

“I’m absolutely certain that everyone who was involved in this is reviewing it at the moment with their lawyers and thinking about what the course of action is.”

“But I suspect they’ll be waiting a while to see what comes out from the SEC and FSA before taking it much further.”

PETER MANDELSON, UK BUSINESS SECRETARY, ON BBC RADIO

“We have got to look at the whole system of constituting and regulating banks.

“We need a system of regulation, a system of levying banks, which is internationally applied.”

NICK CLEGG, LEADER OF UK LIBERAL DEMOCRAT PARTY

“The allegations about alleged fraud in Goldman Sachs are extraordinarily serious.

“They are a reminder, if we needed one, of the recklessness and greed that disfigured the banking industry (Read more about the banking industry recovery.) as a whole.

“We believe that Goldman Sachs should now be suspended in its role as one of the advisers to the government until these allegations are properly looked into.”

BRUCE PACKARD, BANKS ANALYST AT SEYMOUR PIERCE IN LONDON

“I’ve always been slightly surprised that investors haven’t gone after the investment banks in the way they did after the Internet bubble. It seems like it is just starting.”

KORAY YESILDAG, ECONOMIST AT JULIUS BAER FUND FIRM GAM

“It’s part of the whole process of the authorities clamping down and creating a tighter regulatory framework and it’s probably the beginnings of a much wider process and debate not just on Goldman, but across the financial sector.

“It’s the tip of the iceberg and there’s going to be much more all-encompassing legislation. We just have to watch this space and investors are adjusting their outlook on the financial sector accordingly. We have to get used to new realities.”

LONDON BANKS ANALYST, ON CONDITION OF ANONYMITY

“Rightly or wrongly there is a strong political and regulatory agenda at the moment — political battles to be won and regulators with jobs to fight for. This is simply the price of doing business at the moment; regulatory heat.”

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(Compiled by Joel Dimmock; Reporting by Clara Ferreira-Marques, Kirstin Ridley and Steve Slater)

Instant View: UK regulator opens Goldman Sachs probe