Conflict resolution

9 November 2010 By Antony Currie Follow @AntonyMCurrie

The Wall Street firm confirmed it has all but closed its risk arbitrage desk. The Volcker Rule mandated the move. But shuttering it and other prop desks also marks an attempt to shift away from managing conflicts to outright eliminating them. That ll take some time to get right.

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Goldman Sachs, in its quarterly filing with the Securities and Exchange Commission, said that it had liquidated substantially all the positions held by its proprietary traders in its principal strategies unit within its equities division.

The move was a response to the Volcker Rule section of the DoddFrank financial reform act that limits how much of its own capital a bank can use for proprietary trading and investing in private equity and hedge funds.

Separately, the Financial Industry Regulatory Authority fined Goldman $650,000 for failing to notify within the stipulated 30 days that two of its employees had received a Wells Notice from the SEC, a precursor to facing formal charges.

The notices had been issued as part of the SEC's investigation into ABACUS, a synthetic collateralized debt obligation backed by mortgage bond credit default swaps. Goldman later paid a $550 million fine to the SEC to settle civil fraud charges over how it marketed the deal.

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