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Goldman settlement shows complexities of SEC regulations

A recent settlement between a unit of Goldman Sachs Group and the Securities and Exchange Commission shows just how incredibly complex SEC regulations can be, and how severe the penalties can be for violating them.

The case is the first non-cash pay-to-pay penalty imposed by the SEC, involving a Goldman executive who allegedly used company resources to campaign for a friend in a state election. The SEC said that the executive used company phones and his company email to solicit donations to the campaign, and drafted speeches for the candidate that he was supporting.

During the time that he was doing these things, Goldman Sachs was also being awarded business from the government entity where the candidate worked.

Many Houston business owners, particularly those who own and solely operate a small company probably think that since they own the company and pay all of the bills, they may use resources for whatever they choose. Particularly for people who only have one cell phone and one email account that is paid for by their company, it can be hard to draw the distinction between a personal and a work endeavor. However, the distinction is crucial, as in this case, where using company resources ended up costing the investment firm $12 million in SEC penalties.

It is not clear whether or not the executive realized that he was violating pay-to-pay regulations during the time that he was assisting with the campaign. He was terminated from his position at Goldman Sachs shortly after the investigation began.

Source: Wall Street Journal, "Goldman Settles SEC Pay-to-Play Charges," Samuel Rubenfeld, Sept. 27, 2012.