A leading global investment banking, securities and investment management firm revealed in its SEC-filed 10-K that it received a Wells Notice from the SEC staff with respect to the disclosures contained in the offering documents used in connection with a late 2006 offering of approximately $1.3 billion of subprime residential mortgage-backed securities underwritten by the firm. In the filing, the firm, Goldman Sachs Group, Inc., said that it will be making a submission to, and intends to engage in a dialogue with, the SEC staff seeking to address their concerns.
The firm has also received, and continues to receive, requests for information and/or subpoenas from federal, state and local regulators and law enforcement authorities, relating to the mortgage-related securitization process, subprime mortgages, CDOs, synthetic mortgage-related products, particular transactions involving these products, and servicing and foreclosure activities, and is cooperating with these regulators and other authorities.
The SEC uses an informal procedure to allow persons under investigation to present their views to the Commission before an enforcement proceeding is authorized. These presentations are referred to as Wells Submissions, named for John A. Wells who headed the SEC’s 1972 Advisory Committee on Enforcement Policies and Practices.
In its annual report to shareholders, another financial institution noted that government agencies continue investigations or examinations of mortgage related practices relating to whether the firm properly disclosed in offering documents for its residential mortgage-backed securities the facts and risks associated with those securities. Wells Fargo also noted that it has received a Wells Notice from SEC staff relating to its disclosures in mortgage-backed securities offering documents. Wells Fargo said that it continues to provide information requested by the various agencies in connection with certain investigations.