Two Sides of a Sale

The SEC has filed suit against Goldman Sachs on the view that Goldman Sachs engaged in a kind of fraud when it sold instruments against which it was betting.  On the one hand, GOldman was selling real estate instruments and was betting against such instruments at the same time.  It did not tell its customers what it was doing.  It looks bad for a broker to tell you to buy something he or she was, in a side bet, expecting to fail.  Seems like a bit of a conflict of interest.  Securities firms, however, run the two sales through different units, so perhaps not so much of a conflict.  I don't think that analysis is useful -- more salient is that neither the SEC, until pretty recently, nor courts really imposed any sigiificant fiduciary duties on the broker side of things.  If memory serves, there was a recent acquittal of a individual accused of selling securities he thought were about to tank.   In the end, there will be a bunch of motion work and, I think, Goldman will walk away without sanction.