Goldman Sachs Group Inc (GS)

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Goldman to Pay $20 Million to Settle Bond Rigging Lawsuit
By: Zacks Equity Research | November 18, 2019

The Goldman Sachs Group, Inc. (GS) is required to pay $20 million as penalty in order to settle a lawsuit accusing the bank of rigging bond prices issued by Fannie Mae and Freddie Mac. The settlement is yet to get judge’s approval.

The lawsuit was filed against 15 other financial institutions, accusing them to have exploited their market presence by raising prices of bonds in the period between 2009 and 2015. Goldman, Barclays Plc (BCS), JPMorgan Chase and UBS Group (UBS) are said to have underwritten $3.97 trillion, or 77.2% of such bonds.

Though Goldman has not accepted any wrongdoings, it has agreed to make changes to its antitrust-compliance policies related to bond trading as part of the settlement terms. The firms remaining as defendants in the case are Credit Suisse, Barclays and Citigroup.

Also, the company has presented 71,000 pages of potential evidence along with four transcripts of chatroom conversations between its traders and those from Deutsche Bank (DB), BNP Paribas SA, Morgan Stanley and Merrill Lynch.

The class action is led by Pennsylvania Treasurer Joe Torsella, a Birmingham, AL public pension fund, and electrical workers’ retirement and health plans in Dorchester, MA.

Our Take

While Goldman is on track to remodel its business into a more profitable organization, it continues to face several legal investigations, which are likely to keep costs elevated. Also, declining trading revenues due to low levels of volatility and client activity remain a concern.

The stock has gained 31.9% over the past six months compared with 12.2% growth of the industry it belongs to.



Goldman currently carries a Zacks Rank #4 (Sell).

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