Goldman, Sachs Group Inc. said it agreed to settle Securities and Exchange Commission charges and acknowledged making a mistake in its marketing materials for a collateralized debt obligation known as Abacus 2007-AC1.
Its shares gained 5.9%, to $153.81 in after-hours trading. Earlier Thursday, in the regular trading session, shares of the investment bank rose after the SEC said it had a "significant" announcement, without disclosing that it would be the settlement. The stock was down 14% this year as of the close.
Before Goldman released its statement, the SEC said it had reached a $550 million settlement that will resolve its lawsuit, which accused the firm of misleading investors in a subprime mortgage product.
In its statement, Goldman said it did not admit or deny the SEC allegations, but acknowledged that its marketing materials contained incomplete information.
"In particular, it was a mistake for the Goldman marketing materials to state that the reference portfolio was 'selected by' ACA Management LLC without disclosing the role of Paulson & Co. Inc. in the portfolio selection process and that Paulson's economic interests were adverse to CDO investors."
The SEC suit accused Goldman of selling the CDO without disclosing to other participants in the deal that hedge-fund firm Paulson & Co. helped select some of the underlying mortgage securities and was betting on the financial instrument's decline.
Goldman said the settlement, which requires federal court approval, "is the right outcome for our firm, our shareholders and our clients."
The firm also noted that SEC staff does not anticipate recommending charges against it or its employees regarding other transactions it reviewed.
