It dawned on me earlier today that the Goldman Sachs settlement may actually be the more important development than the milquetoast Financial reforms.
Why? As Bloomberg suggested, the settlement will change the firms “train employees who structure or market mortgage securities.” It will also “bolster the vetting and approval process” . . . and probably “lead to a new industry standard for disclosures in private sales of securities, even to the most sophisticated investors.”
But the biggest difference is this: There’s a new sheriff in town, and his name is Robert Khuzami.
For those of you paying attention, Khuzami is the SEC’s director of enforcement. At the SEC news conference announcing the GS settlement, he said he was sending a signal to the entire industry:
“In agreeing to the settlement, we also took into account that Goldman is engaging in a broad-based self-assessment of their overall business practices that will increase transparency, evaluate and remediate conflicts, and take other steps that collectively will reduce the chances that investors in the future will be misled.
This resolution achieves the goals of accountability, punishment for past misconduct and prospective reforms that are the hallmark of a successful outcome.
Today’s settlement is a stark reminder that there will be a heavy price to be paid if firms violate the principles fundamental to our securities laws – full disclosure, honest treatment and fair dealing – and those principles do not change, even if the product is complex or the investor sophisticated.
For that reason, today’s settlement sends a powerful message of deterrence and accountability.”
Many on Wall Street seem to be underestimating this guy. So far, it cost Goldie half a billion dollars.
I said it in April, and I will repeat it here for those of you who are too dim to grasp this: Robert Khuzami is a bad ass, no-nonsense, thorough, award winning Prosecutor. . . He is the shit. My advice to anyone on Wall Street in his crosshairs: If you are indicted in a case by Khuzami, do yourself a big favor: Settle.
That continues to be the best free legal advice you will receive all year. Feel free to ignore it at your own peril.