July 2, 2018 / 8:22 AM / 19 days ago

Goldman to review bookbuilding after Australia regulator blasts block trade

SYDNEY (Reuters) - Goldman Sachs (GS.N) has agreed to review how it sells shares to investors in Australia, after the country’s corporate regulator penalized its local arm for failing to notify the market about dwindling interest in a block trade it conducted in 2015.

FILE PHOTO: A sign is displayed in the reception of the Sydney offices of Goldman Sachs in Australia, May 18, 2016. REUTERS/David Gray/File Photo

This is the second enforcement action in Australia against a global investment bank in a month. In early June, the country’s antitrust watchdog filed “criminal cartel” charges against Citigroup Inc (C.N) and Deutsche Bank AG (DBKGn.DE) over another troubled stock issue.

The Australian Securities and Investments Commission (ASIC) said Goldman Sachs Australia may not have complied with its legal obligations to ensure it operates “efficiently, honestly and fairly” when it failed to tell investors that interest for the A$853 million ($628.66 million) block trade in shares of Healthscope Ltd (HSO.AX) had waned.

The shares of the health operator were owned by TPG Capital Management LP and Carlyle Group LP (CG.O), the private equity giants which sold down Healthscope in an IPO in 2014.

“As the block trade progressed, the level of expected demand ... was not materializing as strongly as had been anticipated,” a court document signed on Monday by ASIC representatives and heads of GS Australia showed.

“Some GS Australia representatives who were unaware that the demand was not materializing as expected continued to make statements”, suggesting the bank had five main investors who were prepared to buy A$500 million of stock, the document added.

That led to “a misperception as to a minimum fixed demand for the sale shares” when demand had softened significantly.

According to the document, GS Australia has agreed to avoid legal action by conducting an internal review of policies, procedures, training and supervision of employees engaged in relevant transactions. It has also agreed to make a community benefit payment of A$500,000.

“We acknowledge ASIC’s concerns and have taken steps to enhance our controls and processes,” a Goldman spokesperson told Reuters, adding the firm had cooperated fully.

Healthscope and Carlyle declined to comment, while a TPG spokesman did not immediately respond to a request for comment.

Australia’s financial sector is experiencing major public scrutiny as a judge-led public inquiry airs allegations of misconduct from over-the-teller-desk cash bribes for loan referrals to board-level deception of a regulator.

The antitrust watchdog’s criminal cartel lawsuit against several senior employees and former employees of Citi and Deutsche over a troubled 2015 sale of A$2.5 billion of shares in Australia and New Zealand Bank (ANZ.AX) has its first court date in October.

Reporting by Byron Kaye and Paulina Duran; Editing by Himani Sarkar

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