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Shocker! Goldman Sachs Admits Front-Running Trades

|Includes: The Goldman Sachs Group, Inc. (GS), XLF

A leaked email from a Goldman (NYSE:GS) executive admits that the firm’s internal research analysis shared trading ideas with its proprietary trading desk before sharing them with some clients.

There’s always so much speculation about how GS is such a great trading firm, this is some more confirmation that what they do isn’t always 100% kosher.

Just for the uncynical there is “supposed” to be a long-standing “Chinese Wall” that divides the Research and Sales sides of investment bankers.  This is to prevent conflicts of interest and pressure on Analysts to recommend a stock.

But, we’ve seen for 30 years that a company coincidentally always recommends a stock when it gets a piece of the issuing IPO, for example.  Perception of ethics in trading/finance took a hard hit with the Madoffs and other scandals of recent years — we’ve seen recently that some corporations will often literally show no ethics/morality when it comes to profits or bookkeeping.

In my view, it would be nice if the government/SEC could finally get tough on these measures which create an uneven playing field for many traders.  Of course, how many of our recent Treasury Secretaries (under BOTH Democrat and Republican administrations) are GS alumni?

Source:  DealBook, NY Times



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.