Goldman's (Sachs) Trading Tips Reward Its Biggest Clients

Source: WSJ

Goldman Sachs Group Inc. research analyst Marc Irizarry's published rating on mutual-fund manager Janus Capital Group Inc. was a lackluster "neutral" in early April 2008. But at an internal meeting that month, the analyst told dozens of Goldman's traders the stock was likely to head higher, company documents show.

The next day, research-department employees at Goldman called about 50 favored clients of the big securities firm with the same tip, including hedge-fund companies Citadel Investment Group and SAC Capital Advisors, the documents indicate. Readers of Mr. Irizarry's research didn't find out he was bullish until his written report was issued six days later, after Janus shares had jumped 5.8%.

Every week, Goldman analysts offer stock tips at a gathering the firm calls a "trading huddle." But few of the thousands of clients who receive Goldman's written research reports ever hear about the recommendations.

At the meetings, Goldman analysts identify stocks they think are likely to rise or fall due to earnings announcements, the direction of the overall market or other short-term developments. Some of their recommendations differ from ratings printed in Goldman's widely circulated research reports. Some Goldman traders who make bets with the firm's own money attend the meetings.

...

Securities laws require firms like Goldman to engage in "fair dealing with customers," and prohibit analysts from issuing opinions that are at odds with their true beliefs about a stock. Steven Strongin, Goldman's stock research chief, says no one gains an unfair advantage from its trading huddles, and that the short-term-trading ideas are not contrary to the longer-term stock forecasts in its written research.

Read more: http://online.wsj.com/article/SB125107135585052521.html

not for the Masters of the Universe.

But it doesn't surprise me that they 'take care of' certain clients more than others.
How many politicians do the same thing? Are they ever prosecuted?

I don't think this is a big deal. Not like it's insider information -- just the opinion of their analysts.

There is a ton of illegal insider trading taking place. All you need to do is look at the action of stocks before major earning or major public news breaks, and it's obvious the market was reacting to information that should have been announced to everyone at the same time.

It's a fraudulent way of doing business, that benefits those who are in on the fraud and causes expense to those who are not.

take your money to another investment bank.