Thursday, 24 July 2014
Last updated 2 hours ago
Aug 2 2011 | 12:31pm ET
A lawyer for the Securities and Exchange Commission approved a controversial collateralized debt obligation before joining the agency, and may testify in the civil trial of the Goldman Sachs banker behind the deal.
Adam Glass served as outside counsel to hedge fund Paulson & Co. four years ago. In that role, he signed off on Abacus-AC1-2007, a $1 billion CDO which the SEC said was structured and marketed by Goldman on behalf of Paulson, which made a mint by shorting the CDO.
The SEC accused Goldman and banker Fabrice Tourre of misleading investors about the CDO, in particular about Paulson's role. The agency claims Paulson played "a significant role" in picking the mortgage-backed securities that went into Abacus, a claim Paulson denies, and that Goldman and Tourre failed to tell investors that the hedge fund was shorting the vehicle.
Paulson has not been accused of any wrongdoing in the case.
Goldman last year paid $550 million to settle the SEC case, but Tourre is fighting the allegations. In June, a judge ruled that the agency's case can proceed, but dismissed several claims against Tourre.
Glass, who joined the SEC two years ago, was deposed in the Tourre case over the summer, The New York Times reports. Now co-chief counsel helping to put together the SEC's derivatives regulations, Glass reviewed and commented on the engagement letter between Goldman and ACA Financial Guaranty, which insured and invested in the CDO, and also saw a draft of the offering circular for investors. Neither document referred to Paulson's alleged hand in picking the securities.
According to the Times, Glass did not push for additional disclosures about Paulson's role, although he did do so on some previous Goldman deals. But Glass, as Paulson's lawyer, did not have a fiduciary duty to Goldman's clients.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…