The Value of Ethics in the Goldman Sachs-ABACUS Case
Case Study: What is Up with Wall Street? The Goldman Standard and Shades of Gray
Activity 3
MGT7019-8
NorthCentral University
Abstract
This assignment reviews the value of ethics in the Goldman & Sachs ABACUS case. It list and analyzes the actions and position taken by Goldman in regard to the transactions that took place in the marketing of the securities in question. It proves that Goldman adopted a standard of complying with law enacted by the government that carries some sanctions for noncompliance, but failed to act to the best interest of its clients in the fiduciary role it was playing.
The question to be investigated is whether Goldman violated business ethics rules in the marketing strategy employed in the ABACUS deal. 1. Actions and practices that are considered gray area:
a. Investment strategy of layering in the 1920 by using its own customers to make money.
b. The strategy of laddering in the 1990s by allocating certain Initial Price Offering (IPO) at a preestablished price with its favorite customers.
c. Engaging in short sales in the 2000s by betting against securities they continue to sell to their customer.
d. Inside bidding up of the values of instruments without clients’ knowledge.
e. Analysts were involved in providing reports that were contrary to their true belief about the qualities of the securities being sold to clients.
f. Leadership ties to the executive branch of the government through political contributions. Goldman Sachs was regulated by the Security and Exchange Commission (SEC). This is conflict of interest, because SEC is a federal agency.
g. The bail out by the Obama Administration. They contributed to Obama’s campaign.
h. Conflict of interest in the selection of ABACUS portfolio. The seller was involved in the selection of the portfolio. The
Activity 3
MGT7019-8
NorthCentral University
Abstract
This assignment reviews the value of ethics in the Goldman & Sachs ABACUS case. It list and analyzes the actions and position taken by Goldman in regard to the transactions that took place in the marketing of the securities in question. It proves that Goldman adopted a standard of complying with law enacted by the government that carries some sanctions for noncompliance, but failed to act to the best interest of its clients in the fiduciary role it was playing.
The question to be investigated is whether Goldman violated business ethics rules in the marketing strategy employed in the ABACUS deal. 1. Actions and practices that are considered gray area:
a. Investment strategy of layering in the 1920 by using its own customers to make money.
b. The strategy of laddering in the 1990s by allocating certain Initial Price Offering (IPO) at a preestablished price with its favorite customers.
c. Engaging in short sales in the 2000s by betting against securities they continue to sell to their customer.
d. Inside bidding up of the values of instruments without clients’ knowledge.
e. Analysts were involved in providing reports that were contrary to their true belief about the qualities of the securities being sold to clients.
f. Leadership ties to the executive branch of the government through political contributions. Goldman Sachs was regulated by the Security and Exchange Commission (SEC). This is conflict of interest, because SEC is a federal agency.
g. The bail out by the Obama Administration. They contributed to Obama’s campaign.
h. Conflict of interest in the selection of ABACUS portfolio. The seller was involved in the selection of the portfolio. The