The Financial Services Authority (FSA) has confirmed it is to launch a probe into the activity of Goldman Sachs International.
“A formal enforcement investigation” is to be set up by the regulator following allegations of fraud leveled at the bank by the Securities and Exchange Commission (SEC) in the US.
The SEC has charged Goldman Sachs and vice-president Fabrice Tourre with fraud after failing to provide investors with the full details of financial products connected to subprime mortgages during the height of the global credit crisis.
In a statement released last week, the investment bank denied there was any truth to the allegations outlined by the SEC.
“The SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation,” the bank explained.
According to the filing from the SEC, Goldman Sachs allowed Paulson & Co, one of the world’s largest hedge funds, to adopt short investment positions against chosen securities.
Meanwhile, Nick Clegg, leader of the UK’s Liberal Democrats, has called for the role of the bank as a financial advisor to the British government to be suspended.
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