Goldman Sachs’ $550 Million To Settle SEC Fraud Charges: Lessons We Can Learn

Goldman Sachs’ $550 Million To Settle SEC Fraud Charges: Lessons We Can Learn

Goldman Sachs, the prominent financial firm, has been under fire for allegations of wrongdoing by the Securities Exchange Commission (SEC), but the case has been settled: Goldman Sachs will pay a fine of $550 million, which is one of the largest fines in SEC history. What can we learn from this about our own finances?

Although Goldman Sachs Will Pay The Fine, It Didn’t Have To Admit Wrongdoing

This is unusual, as the SEC usually insists that a defendant accept the strongest allegations as part of a settlement, according to the Wall Street Journal. The initial complaint against Goldman included one of the most serious possible charges for fraud, and it carries a big stigma for financial firms—meaning a lot of harm for Goldman as a company, if it admitted to it. Instead, Goldman was able to get off with admitting to only a lesser charge, which has to do with intentional and unintentional fraud, and negligence. This may be a sign that the SEC had doubt about being about to prove intentional fraud.

The Value Of A Good Name

Right or wrong, fraudulent or not, one good thing for Goldman Sachs is that this whole affair is coming to a close. When the charges first took the financial world by surprise on April 16, Goldman’s stock market value plummeted by $12 billion in one day. From then on, the tactic was to combine a settlement of the suit itself with a resolution to all of the probes related to the case. Goldman’s chief concern was to preserve its name, end the investigation to calm down its investors, and to lessen the severity of the charges. For the company, holding on to its good name was far more important than the actual money of a settlement—at any rate, $550 million isn’t even a ton of money to a firm whose 2009 revenues totaled about $45.2 billion. In the end, there was much more money at stake because the firm would have suffered severely from such a major blemish.

The Lessons We Can Learn

1. First and foremost: Don’t commit fraud.

 

2. Often, it makes sense to settle issues as soon as possible.
If Goldman had dragged this on longer and taken it to court, the vindication of a court win would likely have been worth less in the long run than this settlement. Regardless of the outcome, taking this to court would be a long, grueling process—in the meantime, Goldman’s clients and investors would have continued to drop off, and the company would have suffered more from the prolonged affair. Similarly, putting off dealing with financial issues (whether credit card debt or unopened envelopes from the IRS) will only make things worse in the long run. Many times, the best thing to do about an inconceivably inconvenient and gut-wrenching problem is to simply deal with it in order to dismiss it as soon as possible.

3. The value of a dollar means very different things to different people.
$550 million is a big fine for the SEC, but it’s a small price to pay for Goldman to end this investigation. Think about this in your regular life, as well: $100 means something very different for different people. The most important thing is to think about the value you’re getting out of that money, and to remember the different ways in which people assign value. Whether you’re negotiating for a higher salary with your employer or inviting friends out to an expensive birthday dinner, remember always that not all dollars are created equal.

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