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August 26, 2009

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Goldman Sachs tips differ from research: report

GOLDMAN Sachs Group Inc provides some of its biggest clients stock tips that come out of regular meetings held by analysts and traders at the investment bank, according to a Wall Street Journal report.

Some of the analysts' views, which can provide insight on potential short-term market movements, can differ from research notes Goldman widely distributes to its clients, the Journal reported.

Critics claim providing the early information to only certain clients hurts customers who aren't given the opportunity to trade on the ideas that come out of the meetings.

Brokerage firms have the right to share their information with various clients as they wish, so long as their analysts' stock recommendations distributed publicly don't contradict what they say internally, said Donald Langevoort, a former Securities and Exchange Commission special counsel who teaches securities law at Georgetown University.

Goldman's compliance officers sit in on the meetings, according to the report.

"My guess is the lawyers (at Goldman) have looked closely at this" and determined it doesn't violate securities laws or rules, Langevoort said. "Nobody on this phone call wants to get into an insider-trading situation."

"As a general matter, (brokerage firms) have obligations to use research information properly, disclose conflicts of interests by research analysts, and ensure their publicly available research is consistent with privately expressed views," SEC spokesman John Nester said on Monday.

He declined to comment on the Goldman situation.


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