In a move designed to address potential conflicts of interest and clarify an opaque policy on employee ownership of stock, Goldman Sachs is making a move to protect its employees and itself.
According to several media reports, Goldman Sachs is changing a policy addressing conflicts of interest to bar investment bankers from trading individual stocks and bonds, a person with direct knowledge of the matter said.
Employees at the New York-based firm were notified Friday, September 26, of the change, which takes effect immediately, said the person, who requested anonymity because the matter isn’t public. They also aren’t allowed to invest in activist or event-driven hedge funds, the person added.
Previously, bankers needed approval before they could invest in individual stocks.
The change comes amid a former Federal Reserve Bank of New York examiner’s recordings of her ex-colleagues’ dealings with Goldman Sachs were featured in reports by public radio and ProPublica, according to a Bloomberg report. The former examiner, Carmen Segarra, sued the New York Fed last year, alleging that she was fired in 2012 because she refused to change her finding that Goldman Sachs didn’t have a conflict-of-interest policy. Her case was dismissed in April and is on appeal.
In 2012, a Delaware judge rebuked Goldman Sachs over its “incomplete and inadequate” handling of a conflict of interest in pipeline operator Kinder Morgan Inc.’s $21.1 billion purchase of El Paso Corp., the investment bank’s biggest takeover assignment the previous year. Stephen D. Daniel, a former Goldman Sachs partner who was lead banker on the deal, failed to disclose ownership of about $340,000 in Kinder Morgan stock, the judge said.
The policy change had been discussed for months and tightens a policy that was adjusted after the Kinder Morgan deal, the person said. The move is intended to reduce potential conflicts with clients and protect the firm’s reputation, the person said.
The new restrictions at Goldman Sachs also will apply to some employees outside of investment banking, including those who could have access to confidential information as part of their roles, the person said.
