Goldman Sachs Group Inc. agreed to pay a record $550 million to settle charges of securities fraud tied to mortgage investments, U.S. regulators said Thursday.
The U.S. Securities and Exchange Commission settlement, which must still be approved by a U.S. District Court judge, included an acknowledgment by Goldman that its marketing materials for a complex subprime product called Abacus 2007-ACI "contained incomplete information," although Goldman neither admitted nor denied wrongdoing, the SEC said.
Goldman also agreed to reform several business practices, including the way it draws up marketing materials for complex mortgage securities and the way it educates employees in that part of its business, the SEC said.
Goldman had no immediate comment on the settlement. Some analysts earlier said ending the lawsuit might cost the firm as much as $1 billion.
Goldman agreed to pay $300 million in fines to the U.S. Treasury Department and make $250 million available to compensate "harmed investors," the SEC said.
"Half a billion dollars is the largest penalty ever assessed against a financial services firm in the history of the SEC," SEC Enforcement Division Director Robert Khuzami said in a statement.
"This settlement is a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing."
The SEC said the settlement did not cover Goldman Vice President Fabrice Tourre, who allegedly played a key role in marketing the Abacus security to investors. The litigation against Tourre would continue, the regulator said.