Regulators send Wells Notices to firms or people to alert them of the likelihood that the government will file an enforcement action against them. Companies or people being investigated have the right to argue why they should not be charged by filing a ‘Wells submission.’
All that occurred with Goldman in the Abacus case, sources familiar with the situation told Reuters. Public companies typically disclose when they or one of their employees receives a Wells Notice. There is no mention of Goldman or structured products executive Fabrice Tourre receiving a Wells Notice in the company’s regulatory filings.
Mortgage product
Tourre, a Goldman vice president who SEC said was mainly responsible for creating the mortgage product known as Abacus, is, like Goldman, facing fraud charges from the SEC over the marketing of the product.Still, companies are not required to disclose Wells notices.
Additionally, there is no mention of SEC investigation on Tourre’s broker registration statement on file with the Financial Industry Regulatory Authority (FINRA). It is customary for a brokerage firm to alert FINRA when one of its employees receives a Wells Notice from a regulatory agency.
A Goldman spokesman declined to comment on the Abacus case and the firm’s decision not to inform the public that it had received a Wells Notice from the SEC. The filing of SEC case against Goldman comes after the investment firm mounted an unprecedented public relations campaign to defend its image.Most recently, it issued a long letter to shareholders in which it defended its business practices and sought to rebut populist outrage that has been building against the firm.
