Federal Agencies Probe Goldman Sachs Over SVB Securities Portfolio Purchase

A well-known financial firm, Goldman Sachs, is currently under investigation after the Federal Reserve and the Securities and Exchange Commission (SEC) opened inquiries into its role in the purchase of Silicon Valley Bank’s (SVB) securities portfolio. According to people with knowledge of the situation, both authorities are paying close attention to what Goldman Sachs did during the capital raise that came before SVB’s collapse. As part of its inquiry into SVB, the Justice Department is also said to have subpoenaed Goldman Sachs.

Dual Role as Advisor and Buyer Raises Questions

The investigations are throwing light on Goldman Sachs‘ dual function as the advisor for the bank’s capital raise as well as the buyer of SVB’s portfolio of assets. The Federal Reserve and SEC have reportedly requested records to investigate whether there were any unlawful communications between Goldman’s investment banking business and its trading division surrounding the sale of the portfolio because of this particular feature. In the industry, the dual duty of purchasing and advising is uncommon and is only performed during difficult economic times.

In response, Goldman has shared that it is “cooperating with and providing information to various governmental bodies in connection with their investigations and inquiries into SVB, including the firm’s business with SVB in or around March 2023.” The bank has also clarified that it informed SVB in writing that it would not act as their advisor on the sale and recommended that SVB engage a third-party financial advisor instead.

A representative for Goldman Sachs responded to the accusations by saying, “[Goldman] informed SVB in writing that we would not act as their adviser on the sale, and that SVB should not rely on any advice from the bank in this regard, but instead hire a third-party financial adviser.”

It has become necessary to look more closely at the circumstances that led to Silicon Valley Bank’s demise as a result of the bank’s failure on March 10 and the petition for Chapter 11 bankruptcy protection by SVB Financial Group on March 17. The investigations aim to shed light on Goldman Sachs’s actions and any potential consequences they may have had on the SVB collapse.