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Goldman Sachs to Pay $550 Million Subprime Mortgage Fine

The SEC said Goldman Sachs & Co. will pay a $550 million fine, the largest penalty ever paid by a Wall Street firm, to the agency, and reform its business practices to settle charges that it misled investors in a subprime mortgage product.

By Michelle A. Samaad | Updated on July 15, 2010

The SEC said Goldman Sachs & Co. will pay a $550 million fine, the largest penalty ever paid by a Wall Street firm, to the agency, and reform its business practices to settle charges that it misled investors in a subprime mortgage product.

In its April 16 complaint, the SEC alleged that Goldman misstated and omitted key facts regarding a synthetic collateralized debt obligation it marketed that hinged on the performance of subprime residential mortgage-backed securities. Goldman failed to disclose to investors vital information about the CDO, known as ABACUS 2007-AC1, particularly the role that hedge fund Paulson & Co. Inc. played in the portfolio selection process and the fact that Paulson had taken a short position against the CDO, the SEC said.

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