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What Does the Tourre Conviction Mean For SEC?
Author: Scarinci Hollenbeck, LLC
Date: August 20, 2013
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The Securities and Exchange Commission (SEC) secured a rare win at trial when a New York jury found former Goldman Sachs Group trader, Fabrice Tourre, committed securities fraud by intentionally misleading investors. The jury also concluded that Tourre aided and abetted an alleged fraud perpetrated by Goldman.
The case involved a failed transaction during the height of the financial crisis. Investors in the collateralized debt obligation, known as Abacus 2007-AC1, were led to believe that hedge fund trader Paulson & Co. was betting on the securities to rise. In reality, Paulson played a role in selecting the mortgage bonds and ultimately bet on them to fail.
In the end, the jury did not buy the defense argument that Tourre, then 28 years old, was a junior trader that was simply following orders. “At the end of the day, he probably could have done the right thing,” one juror told the Wall Street Journal. “But he chose to play the game.” Tourre now faces financial penalties and a ban from the financial-services industry.
For the SEC, this was a “must-win” case, after a dismal record of prosecutions in the wake of the financial crisis. The conviction also lends credibility to the SEC new tougher settlement policy, which will move away from agreements that contain “neither admit nor deny” language and pursue more cases to trial.
Nonetheless, the SEC must still contend with criticism that it can’t or won’t go after the “big fish.” While he held the title of vice president, Tourre was a relatively low-level executive at Goldman.
If you have any questions about this case or would like to discuss the legal issues involved, please contact me, Jay Surgent, or the Scarinci Hollenbeck attorney with whom you work.
- Practices: Corporate Transactions & Business, Financial Services & Regulatory Practice
- Locations: New York City, Red Bank, NJ, Little Falls, NJ
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