Litigation: Notice anything new?

Securities class action plaintiffs argue for disclosure of Wells Notice

Last week, Judge Crotty of the Southern District of New York heard oral arguments in Richman v. Goldman Sachs Group, Inc., a case in which the plaintiffs, attempting to recover losses on their investments in Goldman stock, articulated a novel theory of liability: that Goldman violated the securities laws by failing to disclose its receipt of a Wells Notice relating to its Abacus 2007-ACI collateralized debt obligation (CDO).

According to the plaintiffs, the Wells Notice, which noted that the SEC staff recommended bringing a civil action against Goldman and invited Goldman to provide information as to why the enforcement action should not be brought, was material to the investors and should have been disclosed. Indeed, according to plaintiffs, it was Goldman’s conduct relating to the Abacus CDO that eventually resulted in a $550 million settlement with the SEC.

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Matthew Ingber

Matthew Ingber is a litigation partner at Mayer Brown.

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