Goldman Sachs has been handed a reprimand from the Australian Securities and Investments Commission (ASIC) over its method of selling shares.

The US-based investment banking powerhouse accepted a type of enforcement action known as an enforceable undertaking (EU) from ASIC over Goldman’s bookbuild messaging system.

An EU is a type of settlement agreed between ASIC and a company that has been accused of wrongdoing by the regulator. A court may intervene to enforce terms of the undertaking if the agreeing party fails to comply.

In the agreement, Goldman has promised to review its policy on selling shares to Australian investors. The incident in question happened when Goldman failed to inform investors that interest in the 2015 sale of a $853m block trade of shares in Healthscope Ltd had fallen away. ASIC said this was a failure of the bank to comply with its legal obligation to deal “efficiently, honestly and fairly”.

Goldman was bookbuilder for the block trade of Healthscope shares owned by private equity companies TPG Capital Management and Carlyle Group. A court document signed by ASIC and Goldman representatives said: “As the block trade progressed, the level of expected demand… was not materializing as strongly as had been anticipated. Some GS Australia representatives who were unaware that the demand was not materializing as expected continued to make statements.’


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It was claimed that this led to “a misperception as to a minimum fixed demand for the sale shares” once the actual demand for shares had fallen away. This sort of situation could lead to shares being sold at a higher price than their intrinsic value.

Goldman has avoided being taken to court over the incident by agreeing to review its procedures and internal policies, as well as ensuring that staff training and supervision is of an acceptable standard for all staff involved in such transactions. Goldman also agreed to a kind of voluntary fine known as a ‘community benefit payment’ to the amount of $500,000.

Goldman will now have to run all messages regarding bookbuilds past legal and compliance teams before the messages are sent out to potential investors in certain types of equity transactions. They will also be required to make sure the same legal and compliance oversight is present at any events where sales of those type of transactions or products are being promoted.

ASIC defines a bookbuild as ‘the process of generating, recording and capturing demand from potential investors for a capital raising transaction’.

The Goldman EU is the second time in a month that ASIC has issued proceedings against international investment banks after criminal cartel proceedings were commenced against Citigroup and Deutsche Bank in June over another stock sale.

Stephen Roberts, former chief of Citigroup in Australia and Michael Ormaechea, former head of Deutsche Bank in Australia, are the highest profile individuals out of a group of six bankers who could face up to 10 years in jail or individual fines of up to $420,000. The other executives were Citigroup’s John McLean and Itay Tuchman, Deutsche Bank’s Michael Richardson and ANZ group treasurer Rick Moscati.

The six men face criminal charges over an ANZ Bank capital raising of $2.5bn in 2015. In addition to the individual penalties, the banks involved could be fined up to 10% of their turnover, three times the profit gained, or $10m. The first court date for the case is in October.