Goldman Sachs fined $2m over Asia IPO

Goldman Sachs received a $2m civil penalty from the US Securities and Exchange Commission for violating federal securities laws in connection with four initial public offerings during 1999 and 2000.

The SEC yesterday said Goldman made illegal offers of securities to customers by e-mail, failed to reasonably supervise employees, and made inappropriate statements to the press. The SEC and Goldman have not reached an agreement on a separate investigation that looks into how Goldman distributed shares in IPOs. Goldman could not immediately be reached for comment.

The four IPOs were for Asian issuers: PetroChina, China Telecom Hong Kong, Chinadotcom and Gigame-dia. The sales took place between October 1999 and March 2000.

The e-mails were sent by Goldman's New York-based Asian share sales desk, which during the time of the relevant offerings consisted of between four and five salespersons, including the supervisors. The SEC said the staff sent "lengthy and detailed" communications during a waiting period, which takes place after a registration statement is filed but before the SEC declares it to be effective.

Securities laws prohibit "written offers of securities (including by e-mail) during the waiting period other than by means of a statutory prospectus", the SEC said.

Since the e-mails sent by the Asian share sales desk did not contain the information required for statutory prospectuses, they were in violation of the law.
As for the failure to reasonably supervise, the SEC's order said Goldman provided guidance and training that was "confusing and incomplete" and caused the staff involved "to lack a clear understanding of their obligations".

The inappropriate comments to the press were made during the pre-filing period of the multi-billion-dollar PetroChina IPO when a senior Goldman representative explained that the proceeds of the offering would be used in China, and not in Sudan.