The Goldman Sachs Group, Inc. announced that Goldman, Sachs & Co. has entered into a settlement in principle with the Office of the Attorney General of the State of New York and the Illinois Securities Department (on behalf of the North American Securities Administrators Association) regarding auction rate securities (ARS). Under the settlement, Goldman Sachs will offer to immediately repurchase at par the outstanding auction rate securities that are held by its Private Wealth Management clients and were purchased through the firm prior to 11 February 2008. Goldman Sachs has informed the Securities and Exchange Commission (SEC) of the agreement and intends to fully cooperate with the SECs ongoing investigation. The terms of the settlement include:
Goldman Sachs will pay a $22.5 million penalty.
Goldman Sachs neither admits nor denies allegations of wrongdoing.
Effective immediately, Goldman Sachs will offer to repurchase at par approximately $1 billion of ARS still held by private clients that were purchased through the firm prior to 11 February 2008, with the exception of those ARS where auctions are clearing. Clients who are eligible for this offer include individuals, all charities and non-profits, and those businesses with accounts of $10 million or less. The firm will complete all buybacks no later than 12 November 2008.
Goldman Sachs will compensate private clients who purchased ARS through the firm before 11 February 2008, and sold such securities at a loss between that date and the date of this announcement.
To the extent that a private client has incurred consequential damages beyond the loss of liquidity in the private clients holdings of ARS, Goldman Sachs will participate in a special arbitration process in which Goldman Sachs will be precluded from contesting liability from the sale of the ARS.
Goldman Sachs will endeavor to continue to work with issuers and other interested parties, including regulatory and government entities, to expeditiously provide liquidity solutions for institutional investors.
Goldman Sachs will refund financing fees that it received from all municipal ARS issuers that issued ARS in the primary market through Goldman Sachs between 1 August 2007 and 11 February 2008, and refinanced those securities after 11 February 2008.