Goldman fined as settlement talks seen near

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Goldman Sachs Group Inc shares held their own on one of Wall Street's worst days in months after a report that it would soon enter talks to settle fraud charges brought by the U.S. Securities and Exchange Commission.Goldman officials declined to comment on a report by Fox Business Network's Charlie Gasparino that Wall Street's dominant firm was not interested in battling with regulators. The report cited sources that included an unidentified senior executive at the firm.With investors betting that Goldman will settle with the SEC, shares ended down 5 cents at $149.45. The Dow dropped 2.02 percent."They are hoping they will put it behind them," said Matt McCormick, portfolio manager at Bahl and Gaynor. "They will have an actionable event. The costs will be defined. The risks will be quantified, and then they can go back to making money."Even though Goldman has maintained that the SEC's case is without merit, a settlement could result in regulators backing off civil fraud charges and agreeing to lesser charges and a fine, the report said.But people close to the SEC said the commission may be reluctant to agree to a lenient settlement, Gasparino reported.Neither Goldman Sachs spokesman Samuel Robinson nor SEC spokesman John Heine would comment.BLANKFEIN'S STANDING OVATIONGoldman executives remain upbeat about how the company has handled the recent scrutiny and say it has "seen no degradation of business" as a result of the SEC's charges, according to a research note by Sanford C Bernstein analyst Brad Hintz."Assignments that Goldman had anticipated winning have been won and trade flows remain in line with expectations," Hintz wrote. "The firm's underwritings are being priced at market and the FICC and Institutional Equity are not having any difficulty placing GS client paper."The SEC lawsuit accuses Goldman of failing to tell investors the securities underlying a so-called synthetic collateralized debt obligation were chosen by hedge fund investor John Paulson, whose fund was betting the CDO would lose value.Goldman has also drawn the attention of a Senate subcommittee and is facing a criminal investigation and shareholder lawsuits.Morale among Goldman employees remains strong and executives are proud of how staff has handled the scrutiny in recent weeks, Hintz said."Perhaps not surprising, the partnership has closed ranks too and at Goldman's April 20, 2010, managing directors earnings call, (Goldman Chief Executive) Lloyd Blankfein received a standing ovation from his partners."NYSE FINES GOLDMANSeparate from the SEC fraud charges, Goldman's market-making unit has been censured and fined $450,000 after U.S. regulators found hundreds of violations in how it processed customer trades involving short sales of stocks.The SEC and NYSE Regulation said on Tuesday Goldman Sachs Execution & Clearing LLP violated emergency requirements adopted in September 2008, two days after Lehman Brothers Holdings Inc went bankrupt, to limit naked short selling.A short sale occurs when a customer borrows a security, sells it in a bet the price will go down, and then buys it back later to repay the lender. A naked short sale occurs when the customer has no intention of borrowing the security.Half the penalty will go to NYSE Regulation, a unit of NYSE Euronext, and the rest to the federal government. Goldman agreed to settle without admitting wrongdoing.A Goldman spokesman said the violations resulted from a processing error and had no financial effect on clients. He also said the unit clears about 3 million trades a day and has improved its automated processes.(Additional reporting by Dan Wilchins; Editing by Steve Orlofsky)
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