Goldman warns of investor ‘guerrilla warfare’
The Supreme Court will hear arguments today from Goldman Sachs and from pension funds over a claim that the Wall Street giant misled investors about its work selling complex debt investments in the prelude to the 2008 financial crisis. In its latest brief, Goldman makes an interesting argument: Investors shouldn’t rely on statements such as “honesty is at the heart of our business” or “our clients’ interests always come first” that appear in S.E.C. filings and annual reports.
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The case is a test of shareholders’ ability to sue over claims of investment fraud. The pension funds have sought to sue as a class over Goldman’s statements, saying that they believed the claims of honesty. Goldman has argued in its latest brief that the investors are resorting to “guerrilla warfare” and aren’t providing “serious legal arguments.” The bank says that an investor victory would lead to a barrage of future lawsuits over “general and aspirational statements” of the kind made by “virtually every public company in America.”
The Biden administration isn’t taking sides but will say today that “meritorious private securities-fraud suits” are “an essential complement” to enforcing securities laws.
How a former S.E.C. commissioner thinks the court will respond to Goldman’s arguments: “I expect the court to be troubled by the claim that companies cannot be held accountable for saying that clients come first and then acting otherwise,” Robert Jackson Jr., who served on the commission from 2018 to 2020 and is now an N.Y.U. law professor, told DealBook. (The justices probably won’t agree with the claim that making a company “mean what it says” will lead to a tsunami of meritless lawsuits, he added.) Regardless, Goldman is right that the stakes are high, he said, since the case will probably decide whether shareholders can “hold corporate insiders accountable when they tell investors one thing and do another.”
The New York Times
Me: Investing means don’t play with money you cannot afford to lose, it seems.