Goldman Sachs

Where the disclosure says "take positions," I could either be long (betting on or owning) or short (betting against) stocks. The truth is that I have never shorted any stock held by customers; after all, I pretty much invest the same way as my customers (and in the same things), except that I sometimes try investments out in a small account before I recommend them. Aside from the disclosure, which applies to my monthly column, as a registered rep, I am not permitted to engage in front-running (using knowledge of customer trades to improve my own account) or pump-and-dump (recommend a stock to the extent that the price increases, and then sell my own stock at a profit).

Goldman has many divisions, including wealth management for individuals. I've been in this business long enough to know that it is possible to have a customer who adopts one strategy that is separate from a firm's strategy or general recommendation, and, indeed, much different than the strategy of a different customer. I would even guess that it would be easy for one division of Goldman to have a different view from another. This should be an interesting case, since it is always possible that an investor or institution executed its own strategy with Goldman, with or without Goldman advice. Presumably, the SEC has examined all the disclosures in the case, right?

Whatever the outcome, it's interesting from the standpoint of the word brokerage. Since brokerages exist to make a market for buyers and sellers, they function as intermediaries for both. I guess it will depend on how the courts view Goldman and its disclosures. It's confusing — Goldman has a lot of moving parts. I keep wondering if the SEC, (which Harry Markopolis, when he tried time and again to blow the whistle on Bernie Madoff, famously suggested had no folks with degrees in finance), ever recruited any.

Have a sensational week! Spring has sprung in Oklahoma and should be coming soon to a region near you.

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