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UK to investigate Goldman Sachs UK to investigate Goldman Sachs
(30 minutes later)
The Financial Services Authority (FSA) is starting a formal UK enforcement investigation into Goldman Sachs in relation to recent fraud allegations.The Financial Services Authority (FSA) is starting a formal UK enforcement investigation into Goldman Sachs in relation to recent fraud allegations.
The move follows claims made by the Securities and Exchange Commission in the US that Goldman defrauded investors during the sub-prime housing crisis.The move follows claims made by the Securities and Exchange Commission in the US that Goldman defrauded investors during the sub-prime housing crisis.
Goldman Sachs has strongly rejected the SEC's claims as wrong "in fact and law".Goldman Sachs has strongly rejected the SEC's claims as wrong "in fact and law".
The FSA said it would liaise closely with the SEC in its review.The FSA said it would liaise closely with the SEC in its review.
Goldman Sachs is due to announce its profits for the first three months of 2010 later on Tuesday.Goldman Sachs is due to announce its profits for the first three months of 2010 later on Tuesday.
'Just starting'
It is unusual for the FSA to announce the beginning of a formal investigation. It is understood that the investigation process typically takes months, if not years.It is unusual for the FSA to announce the beginning of a formal investigation. It is understood that the investigation process typically takes months, if not years.
The enforcement division of the FSA will now have powers to demand that Goldman provide it with documentation such as records of transactions and records of telephone calls.The enforcement division of the FSA will now have powers to demand that Goldman provide it with documentation such as records of transactions and records of telephone calls.
If the watchdog finds Goldman at fault, it could impose a fine on the bank.If the watchdog finds Goldman at fault, it could impose a fine on the bank.
Bruce Packard, banking analyst at Seymour Pierce, said "it seems like it is just starting".
"I've always been slightly surprised that investors haven't gone after the investment banks in the way they did after the internet bubble."
AllegationsAllegations
On Friday, the SEC issued civil charges against Goldman, alleging that it failed to disclose conflicts of interest during the marketing of sub-prime mortgages in which investors lost $1bn.On Friday, the SEC issued civil charges against Goldman, alleging that it failed to disclose conflicts of interest during the marketing of sub-prime mortgages in which investors lost $1bn.
The SEC says Goldman failed to disclose "vital information" that one of its clients, Paulson & Co, helped choose which securities were packaged into the mortgage portfolio.The SEC says Goldman failed to disclose "vital information" that one of its clients, Paulson & Co, helped choose which securities were packaged into the mortgage portfolio.
These securities were sold to investors in 2007.These securities were sold to investors in 2007.
On Sunday, Prime Minister Gordon Brown called for the FSA to launch an inquiry into Goldman Sachs.On Sunday, Prime Minister Gordon Brown called for the FSA to launch an inquiry into Goldman Sachs.
"Hundreds of millions of pounds have been traded here and it looks as if people were misled about what happened," he said. "I want the Financial Services Authority to investigate it immediately.""Hundreds of millions of pounds have been traded here and it looks as if people were misled about what happened," he said. "I want the Financial Services Authority to investigate it immediately."