Goldman, Sachs & Co.

Securities Exchange Act of 1934
Release No. 48436 / September 4, 2003

Administrative Proceeding
File No. 3-11240


In the Matter of

GOLDMAN, SACHS & CO.,

Respondent.


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ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER PURSUANT TO SECTIONS 15(b)(4), 15C(c)(1)(A) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934

I.

The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Sections 15(b)(4), 15C(c)(1)(A) and 21C of the Securities Exchange Act of 1934 (the "Exchange Act") against Goldman, Sachs & Co. ("Goldman Sachs" or "Respondent").

II.

In anticipation of the institution of these proceedings, Goldman Sachs has submitted an Offer of Settlement (the "Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, and without admitting or denying the findings set forth herein, except as to the Commission's jurisdiction over the Respondent and over the subject matter of these proceedings which are admitted, Respondent consents to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Sections 15(b)(4), 15C(c)(1)(A) and 21C of the Securities Exchange Act of 1934, as set forth below.

III.

On the basis of this Order and Respondent's Offer, the Commission finds that1:

A. FACTS

1. Summary

This matter concerns Goldman Sachs' purchases of United States Treasury 30-year bonds immediately after one of its employees received and conveyed to traders material, nonpublic information that the United States Department of the Treasury ("Treasury Department") was about to announce the suspension of future bond issuances. At a press conference on the morning of October 31, 2001, the Treasury Department announced its refunding requirements for the fourth quarter of 2001. The Treasury Department set an embargo time of 10:00 a.m. for the public release of the refunding information.

Peter Davis, a Washington, D.C.-based political consultant hired by Goldman Sachs, among others, attended the press conference and knew that the information was embargoed until 10:00 a.m. Davis had attended such refunding press conferences for a number of years. News announced at the refunding press conferences was typically embargoed until a certain time. Davis had expressly agreed to honor the news embargos.

At approximately 9:35 a.m. on October 31, after the refunding press conference but before the lifting of the news embargo, Davis telephoned John Youngdahl, a Vice President and a Senior Economist in Goldman Sachs' Global Economics Group, who, among other duties, provided economic analysis for Goldman Sachs' U.S. Government securities desk (the "Treasury Desk"). Davis told Youngdahl, among other things, that the Treasury Department would suspend the issuance of 30-year bonds. Davis and Youngdahl had previously entered into an agreement whereby Davis would attend the Treasury Department's quarterly refunding press conferences and provide embargoed information to Youngdahl.

Youngdahl told traders on the Treasury Desk the information that Davis provided concerning the suspension of the 30-year bond. Youngdahl and the traders understood that the Treasury Department's refunding announcement would be released at 10:00 a.m. and that the refunding information was confidential until released. The traders purchased $84 million in par value of 30-year bonds for Goldman Sachs' proprietary accounts before 9:43 a.m., when the Treasury Department posted the refunding announcement on its website. The traders sold the bonds shortly after the first wire service reports of the Treasury Department action and made profits of $1,576,561 for Goldman Sachs. The traders also made profits of $2,318,500 on 2,336 bond futures contracts that they purchased between the time of Davis' telephone call and 9:43 a.m.

Goldman Sachs failed to establish, maintain and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information potentially obtained by outside consultants. Goldman Sachs, and in particular the Treasury Desk, utilized a number of paid consultants who collected information from a variety of sources. Therefore, although Goldman Sachs had policies and procedures regarding the use of confidential information, including information obtained from external sources such as clients, potential clients and other third parties generally, its policies and procedures should have identified specifically the potential for receiving material, nonpublic information from outside consultants.

2. Respondent

Goldman Sachs is a broker-dealer headquartered in New York City and registered with the Commission pursuant to Section 15 of the Exchange Act.

3. Quarterly Refunding Press Conferences

During the relevant period, the Treasury Department held refunding press conferences four times per year. Calendar year 2001 quarterly refunding announcements took place on January 31, May 2, August 1 and October 31. In these quarterly refunding announcements, the Treasury Department informs the public about the federal Government's financing plans for the following quarter. The information conveyed may include details of the Treasury Department's plans for buybacks and issuances of Treasury securities. The Treasury Department's practice was to set an embargo time at the press conference for the public release of the refunding information. The embargo policy enabled the press to disclose simultaneously in an accurate and orderly fashion to all market participants the information the Treasury Department disclosed at the press conferences.

4. Peter Davis' Attendance at Quarterly Refunding Press Conferences

Peter Davis attended the Treasury Department's quarterly refunding press conferences on a regular basis for several years prior to October 2001. A Treasury Department official had granted Davis permission to attend the press conferences on the condition that Davis expressly agreed to honor the news embargo. Davis expressly agreed to do so.

5. Goldman Sachs' Relationship with Peter Davis

In early 2001, another employee of Goldman Sachs suggested to Youngdahl that he meet with Davis, whose clients included several securities and investment firms. Davis was recommended to Youngdahl because of Davis' contacts in and knowledge about the federal Government. Youngdahl first met Davis in mid-February 2001. At that meeting, Davis explained to Youngdahl, among other things, that he knew people at the Treasury Department. Davis also gave Youngdahl a sales brochure. Davis told Youngdahl that he had good contacts and could give information about developments in Congress and in the administration.

Subsequently, in May 2001, Davis e-mailed the brochure for his firm, Davis Capital Investment Ideas, to Youngdahl, who then forwarded it to others at Goldman Sachs. Davis' brochure states, in part, "My ability to generate such information, before it reaches the media, derives from relationships built over 26 years of working with Washington policymakers." It further states, "Advance information is only half the battle. The other half is supplying the judgment to turn advance information into an investment idea. Unless the papers are wrong, I avoid current news. My clients pay me for the first call on investment issues they care about."

After an introductory trial period, and based on the recommendation of Youngdahl, Goldman Sachs determined to retain Peter Davis as a consultant. Goldman Sachs retained Davis in May 2001 and began paying him $1,500 per month for his services. Youngdahl was Goldman Sachs' main point of contact with Davis. A senior trader on the Treasury Desk (the "Senior Trader") was aware of the decision to hire Davis. During the trial period, Davis put several Goldman Sachs employees on his e-mail list in addition to Youngdahl, including the Senior Trader. Davis regularly transmitted e-mails to all clients, including Youngdahl and the Senior Trader. In addition to these regular e-mails, Davis also communicated individually with Youngdahl by telephone and e-mail. In several of these various communications, Davis provided information that Davis specifically represented was derived from conversations with persons at the Treasury Department or from "Treasury sources."

In mid-July 2001, Davis and Youngdahl entered into an agreement whereby Davis would attend the Treasury Department's quarterly refunding press conferences and then provide Youngdahl with embargoed refunding information. Subsequently, on the morning of the Treasury Department's August 1, 2001, refunding announcement, which Davis attended, Davis called Youngdahl before the embargo was lifted and told him the exact types and amounts of securities that would be sold at the upcoming auctions. Davis was the only one of the consultants Goldman Sachs retained who communicated this information to Youngdahl in the minutes before the announcements.

6. Treasury Department's Announcement on October 31, 2001

On October 31, 2001, the Treasury Department's quarterly refunding press conference lasted from approximately 9:00 a.m. to 9:25 a.m. Treasury Department officials informed attendees, among other things, that the department planned to suspend issuance of the 30-year Treasury bond, a mainstay of the Government securities market. Pursuant to long-standing practice, Treasury Department officials also instructed attendees that the information conveyed at the conference was subject to an embargo. The embargo was set to expire at 10:00 a.m. Davis attended the October 31 press conference and understood that the information provided at the press conference was embargoed until 10:00 a.m. A Treasury Department employee, however, inadvertently published the information on the Treasury Department website at 9:43 a.m.

Shortly after learning that the Treasury Department had decided to suspend issuance of the 30-year bond, but before the expiration of the embargo period, Davis telephoned a number of his clients, including Youngdahl. Youngdahl worked in very close physical proximity to the traders on the Treasury Desk so that he could provide them with continuous discussions and running commentary about what he saw occurring in the economy or politics.

7. Goldman Sachs' Actions on October 31, 2001

Before Youngdahl received Davis' telephone call, Youngdahl, the Senior Trader and another 30-year bond trader on the Treasury Desk (the "Second Trader") had been aware that the Treasury Department was going to make its quarterly refunding announcement on the morning of October 31, 2001. Youngdahl also understood that the Treasury Department's quarterly refunding announcements were subject to a press embargo, which he understood to be a practice whereby information provided to the press is not to be disclosed until a specified time. Youngdahl and the Senior Trader also knew that the refunding information was confidential until publicly released because, at the time, the Managing Director of Goldman Sachs who supervised, among others, the Treasury Desk, represented Goldman Sachs on the Treasury Borrowing Advisory Committee ("TBAC"), an industry body that consults with and advises the Treasury Department on debt finance issues. Youngdahl and the Senior Trader were aware that, as a result of his TBAC membership, the Managing Director was prohibited from discussing quarterly refunding matters with them until the Treasury Department released the refunding information to the public.2 The Second Trader also understood that the Treasury Department Refunding information was embargoed until publicly disseminated by the press.

Youngdahl anticipated that the quarterly refunding announcement would be released at approximately 9:30 - 9:45 a.m. on the morning of October 31, 2001. Youngdahl marked this release time on the monthly calendar that he distributed to the traders on the Treasury Desk. However, sometime between 9:15 a.m. and 9:25 a.m. that day, Youngdahl saw a wire report stating that the Treasury Department would not release its refunding announcement until 10:00 a.m. Youngdahl then advised the Treasury Desk traders of the delay in the expected announcement time.

At 9:35 a.m., Davis telephoned Youngdahl and told him, among other things, that the Treasury Department would not sell any more 30-year bonds. Youngdahl told Davis to hold and muted his telephone. Youngdahl leaned back in his chair and advised the Senior Trader, "I wouldn't be short bonds if I were you." Other traders also heard Youngdahl's comment. This remark was the first specific trading advice that Youngdahl gave on October 31. Based on his prior agreement with Davis, Youngdahl knew that Davis was providing embargoed refunding information that he received from the Treasury Department's refunding press conference. Prior to October 31, Goldman Sachs' public position in research reports Youngdahl drafted was that the Treasury Department would continue to issue the 30-year bond and that traders should be long 30-year bond futures. Minutes before the Davis phone call, Youngdahl was also telling Goldman Sachs' salespeople that it was his position that the Treasury Department would continue issuing the 30-year bond.

After his comment to the Senior Trader, Youngdahl asked Davis to repeat the information. Youngdahl then told the Senior Trader that Davis had called, and relayed all of the substantive information that Davis provided. The Second Trader joined the conversation and also heard the statement that the 30-year bond would be discontinued.

Subsequent to Davis's 9:35 a.m. telephone call, and up to 9:43 a.m., Goldman Sachs' Treasury Desk made eleven purchases totaling $84 million par value of 30-year bonds in the cash market for Goldman Sachs' proprietary accounts, and did not sell any bonds. During this entire period, the Senior Trader and the Second Trader understood that the Treasury Department had not yet released the refunding announcement. The Treasury Desk sold these $84 million in bonds, among others, after 9:59 a.m. on October 31, making profits of $1,576,561. During the same time period, the Treasury Desk purchased a total of 2,336 bond futures contracts with a par value of $233.6 million. The only sale during this time period was of 100 contracts, or $10 million par value. After 9:51 a.m. on October 31, the Treasury Desk sold $233.6 million in bond future contracts (2,336 contracts), among others, making profits of $2,318,500.

8. Market Effect of the Information

The Treasury Department's announcement that it would no longer issue the 30-year bond had a dramatic effect on the price and yield of the 30-year bond in public trading. Over the course of the day on October 31, the bond price increased over $5.00 and the yield decreased 33 basis points from the previous day. The changes in price and yield in the 30-year bond following the announcement were the largest one-day changes since October 1987.

9. Goldman Sachs' Policies and Procedures to Prevent the Misuse of Nonpublic Information

During the relevant period, Goldman Sachs had a written manual entitled "Policies and Procedures Regarding Confidential or Proprietary Information, the Chinese Wall and Personal Trading." The manual set forth, among other things, prohibitions on the misuse of material confidential information, and policies for handling confidential information. "Confidential information" subject to those prohibitions and procedures was defined to include nonpublic information provided by an external source (such as a client, prospective client, or other third party) with the expectation that the information will be kept confidential and used solely for the business purposes for which it was conveyed by the external source. The manual further explained that confidential information may include "tips" received directly or indirectly from corporate insiders whether or not in the context of a client relationship. Treasury Desk employees also received an additional written statement concerning Goldman Sachs' confidentiality principles. The additional statement instructed Treasury Desk employees, among other things, that they should "treat as confidential all non-public information provided directly or indirectly by a client, prospective client or third party with the expectation that the information will be kept confidential."

During the relevant period, Goldman Sachs used numerous consultants who provided a wide range of information and analysis concerning political, budgetary, and regulatory developments in Washington. The Treasury Desk alone used at least six such consultants, not including Davis. Goldman Sachs paid these consultants for their services, and they provided information to Goldman Sachs for its use and benefit.

Goldman Sachs had no written procedures specifically addressed to the potential that consultants like Davis could obtain and provide material confidential information to the firm. No written guidelines expressly discussed the use of consultants or the handling of information obtained from consultants. Goldman Sachs' written procedures did not expressly address circumstances in which consultants like Davis conveyed information to Goldman Sachs with the expectation that Goldman Sachs would use the information, even though the consultant obtained the information from a source that intended the information to be kept confidential.

B. LEGAL ANALYSIS

1. Sections 15(c)(1)(A) and 15(c)(1)(C) of the Exchange Act and Rule 15c1-2

Sections 15(c)(1)(A) and 15(c)(1)(C) of the Exchange Act prohibit the use of manipulative, deceptive, or other fraudulent devices or contrivances by broker-dealers and Government securities broker-dealers in over-the-counter transactions or transactions on exchanges where the broker-dealer is not a member. 15 U.S.C. §78o; see Asch v. Philips, Appel & Walden, Inc., 867 F.2d 776, 777 (2d Cir.), cert. denied, 493 U.S. 835 (1989). Congress enacted the provisions of which Section 15(c)(1) forms a part "to provide for the establishment of a mechanism of regulation among over-the-counter brokers and dealers . . . to prevent acts and practices inconsistent with just and equitable principles of trade." H.R. Rep. No. 2307, 75th Cong., 3d Sess. (1938).

Congress has expressed its strong intent to preserve the fairness and integrity of the Government securities markets.3 Further, the antifraud provisions of the federal securities laws, which prohibit among other things insider trading, apply to debt securities, including Government securities, as well as to equity securities. See SEC v. Morse, 92 Civ. 64 (E.D.Ky. June 23, 1992); In re Blythe & Co., 43 S.E.C. 1037 (1969); United States v. Rough, Crim. No. 88-425 (D.N.J. 1988).

By the conduct described above, Goldman Sachs violated Sections 15(c)(1)(A) and 15(c)(1)(C) of the Exchange Act, and Rule 15c1-2. Peter Davis misappropriated information concerning the suspension of 30-year bond issuances in violation of a duty of trust or confidence owed to the Treasury Department, the source of the information. See United States v. O'Hagan, 521 U.S. 642, 651 (1997); 17 C.F.R. § 240.10b5-2. John Youngdahl, Davis' tippee, violated insider trading prohibitions because he knew or should have known that the refunding information that he passed on to the traders at Goldman Sachs had been improperly disclosed to him in violation of such a duty. See SEC v. Maio, 51 F.3d 623, 634 (7th Cir. 1995) (tippee has duty not to trade when he "knew or should have known that [tipper's] disclosure was improper"); see also SEC v. Sekhri, 1998 U.S. Dist. LEXIS 7490, *5 (S.D.N.Y.), citing SEC v. Musella, 678 F. Supp. 1060, 1062 (S.D.N.Y. 1988). In particular, Youngdahl knew that Davis obtained the refunding information by attending the Treasury Department's press conference; that Davis was providing him with nonpublic refunding information in violation of the news embargo; and that such refunding information was intended to remain confidential until publicly announced.

Youngdahl's principal function on the Goldman Sachs Treasury desk was to advise the traders on that desk with respect to economic and political developments that affected their daily trading activity. Davis was a paid consultant to Goldman Sachs who was in regular contact with Youngdahl, but the firm did not have procedures reasonably designed to prevent the misuse of material, nonpublic information obtained from consultants like Davis. All of the trading at issue was undertaken for the benefit of Goldman Sachs in Goldman Sachs proprietary accounts. Under these circumstances, it is appropriate to hold Goldman Sachs liable for the conduct of Youngdahl, see Suez Equity Investors v. Toronto-Dominion Bank, 250 F.3d 87, 101 (2d Cir. 2001) (corporate entity can be found liable for acts of its employees and agents), and for all bond trading profits that resulted from Youngdahl's conveying the information he learned from Davis, whether or not the individual traders knew or should have known that they were trading on improperly obtained nonpublic information. See SEC v. Clark, 915 F.2d 439, 454 (9th Cir. 1990) (tipper liable for tippee's trading profits where tippee not found liable because tippee was unaware of the breach of duty); SEC v. Warde, 151 F.3d 42, 49 (2nd Cir. 1998) ("tippee's gains are attributable to tipper, regardless whether benefit accrues to the tipper").

2. Section 15(f) of the Exchange Act

Section 15(f) of the Exchange Act requires brokers and dealers registered with the Commission to establish, maintain, and enforce written policies and procedures reasonably designed, taking into consideration the nature of such broker's or dealer's business, to prevent the misuse, in violation of the federal securities laws, of material, nonpublic information by such broker or dealer or any person associated with such broker or dealer. For the reasons described above, taking into consideration Goldman Sachs', and in particular the Treasury Desk's, regular use of paid consultants for their knowledge, contacts, and information concerning the federal Government, Goldman Sachs' policies were not reasonably designed to prevent the misuse of material nonpublic information received from such persons.

The securities industry has long been aware of the need for effective compliance policies to guard against the risk of misuse of material nonpublic information, and the need to tailor those policies to the specific activities of the individual firm. See, e.g., In re Guy P. Wyser-Pratte et al., Exch. Act Rel. No. 44283; Advisers Act Rel. No. 1943 (May 9, 2001). Goldman Sachs' Treasury Desk has regularly communicated with consultants who may at times possess material nonpublic information from Government sources. This interaction created a need to establish specific policies and procedures to address the potential receipt of such information by employees of the firm. Under these circumstances, the firm's policies needed to be particularly sensitive to the possibility of misuse and to include safeguards tailored to the particular risks attending such interactions with consultants possessing confidential Government information.

C. CONCLUSION

As a result of the conduct discussed above, Goldman Sachs willfully violated Sections 15(c)(1)(A), 15(c)(1)(C) and 15(f) of the Exchange Act and Rule 15c1-2 thereunder.

Goldman Sachs' Cooperation

In determining to accept the Offer, the Commission considered the cooperation afforded the Commission staff by Goldman Sachs, including that the firm brought this matter to the staff's attention promptly.

IV.

Undertaking

Goldman Sachs undertakes, within fifteen (15) days of the entry of this Order, to pay disgorgement and prejudgment interest for the bond futures transactions in the total amount of $2,562,740. Based on the fact that a civil action is pending in the United States District Court for the Southern District of New York captioned SEC v. Peter J. Davis, et al., upon a complaint alleging violations arising from the same or substantially similar facts as those alleged herein, Respondent shall make payment to the Clerk of that Court pursuant to 17 C.F.R. § 201.611(b), together with a cover letter identifying the related action pending in that Court, the civil action number of that action, and the name of the Court. Respondent shall simultaneously transmit photocopies of such payment and letter to the SEC=s counsel in this action. By making this payment, Respondent relinquishes all legal and equitable right, title, and interest in such funds, and no part of the funds shall be returned to Respondent.

If, for any reason, the Clerk of the Court for the United States District Court for the Southern District of New York has not established a fund for the related action pending in that Court, such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Office of Financial Management, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies Goldman Sachs as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Lawrence A. West, Associate Director, Division of Enforcement, Securities and Exchange Commission, 450 5th Street N.W., Washington, DC 20549-0801. In determining whether to accept the Offer, the Commission has considered this undertaking.

V.

In view of the foregoing, the Commission deems it appropriate in the public interest to impose the sanctions specified in Respondent Goldman Sachs' Offer.

ACCORDINGLY, IT IS ORDERED that:

A. Pursuant to Sections 15(b)(4) and 15C(c)(1)(A) of the Exchange Act, Goldman Sachs is censured;

B. Pursuant to Section 21C of the Exchange Act, Goldman Sachs shall cease and desist from committing or causing any violations and any future violations of Sections 15(c)(1)(A), 15(c)(1)(C) and 15(f) of the Exchange Act and Rule 15c1-2 promulgated thereunder;

IT IS FURTHERED ORDERED that Goldman Sachs shall, within fifteen (15) days of the entry of this Order, pay disgorgement and prejudgment interest for the 30-year bond transactions in the total amount of $1,742,642. Based on the fact that a civil action is pending in the United States District Court for the Southern District of New York captioned SEC v. Peter J. Davis, et al., upon a complaint alleging violations arising from the same or substantially similar facts as those alleged herein, Respondent shall make payment to the Clerk of that Court pursuant to 17 C.F.R. § 201.611(b), together with a cover letter identifying the related action pending in that Court, the civil action number of that action, and the name of the Court; and specifying that payment is made pursuant to this Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order pursuant to Sections 15(b)(4), 15C(c)(1)(A) and 21C of the Exchange Act of 1934. Respondent shall simultaneously transmit photocopies of such payment and letter to the SEC=s counsel in this action. By making this payment, Respondent relinquishes all legal and equitable right, title, and interest in such funds, and no part of the funds shall be returned to Respondent. A civil action captioned SEC v. Peter J. Davis, Jr., et al. based upon a complaint alleging violations arising from the same or substantially similar facts as those alleged herein is pending in the United States District Court for the Southern District Court of New York (the "District Court"). To minimize the costs of administering a plan of disgorgement, the Commission, pursuant to 17 C.F.R. § 201.611(b), is ordering that Respondent pay the required disgorgement funds into the District Court's registry just as Respondent is undertaking to pay other funds into the District Court's registry. Within a reasonable time after the final resolution of the related District Court matter, a proposed plan of disgorgement shall be submitted to the District Court for its approval.

If, for any reason, the Clerk of the Court for the United States District Court for the Southern District of New York has not established a fund for the related action pending in that Court, such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Office of Financial Management, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies Goldman Sachs as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Lawrence A. West, Associate Director, Division of Enforcement, Securities and Exchange Commission, 450 5th Street N.W., Washington, DC 20549-0801.

IT IS FURTHER ORDERED that Goldman Sachs shall, within seven (7) days of the entry of this Order, pay a money penalty in the amount of $5,000,000 to the United States Treasury. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Office of Financial Management, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies Goldman Sachs as a Respondent in these proceedings and the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Lawrence A. West, Associate Director, Division of Enforcement, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington DC 20549-0801.

IT IS FURTHER ORDERED that within ninety (90) days of the entry of this Order (1) Goldman Sachs' Legal Department shall complete a comprehensive review, including recommendations, of the policies, procedures and practices maintained and implemented by the Respondent pursuant to Section 15(f) of the Exchange Act that relate to the findings of this Order; (2) Goldman Sachs shall adopt, implement and maintain policies, procedures and practices pursuant to Section 15(f) of the Exchange Act that are consistent with the findings of this Order and the recommendations contained in the comprehensive review; and (3) Goldman Sachs shall submit a report, approved by and signed by Goldman Sachs' Legal Department, to the staff of the Commission detailing the results of the review and the new policies, procedures and practices adopted pursuant to Section 15(f) of the Exchange Act.

By the Commission.

Jonathan G. Katz
Secretary

Endnotes

1 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.

2 See Government Securities Act Amendments of 1993 (Pub. L. No. 103-202, 107 Stat. 2344), §202(c).

3 The House report to the Government Securities Act Amendments of 1993 emphasized "reducing the disparity of information that may exist between market 'insiders' and 'outsiders' and providing public investors with more equal access to information that is available to primary and other dealers." H.R. Rep. No. 103-255, at 27 (1993). Similarly, the Senate report found that "expanded information access serves the public interest by enhancing customer protection and providing for fair competition among market participants." S. Rep. No. 103-109, at 19 (1993). The report also stated, "The U.S. government securities market is one of the largest and most liquid securities markets in the world. It is also the most important securities market for U.S. taxpayers... Therefore, it is essential that when the Treasury auctions its bills, notes, and bonds, it must have broad participation from investors, who have confidence in the integrity of the market and are willing to participate in it." Id. at 7.