The Securities and Exchange Commission has notified the Goldman Sachs Group that the agency may pursue a complaint against the firm stemming from the early disclosure of the Treasury Department's plans to retire the 30-year bond, according to a person close to the firm.
The Treasury's announcement of the bond's demise on Oct. 31 appeared to have caught many bond traders and market analysts flat-footed. The price of the bond surged that day, jumping 1 26/32 points, about seven times a normal daily move. But the bond had begun rising sharply shortly before the announcement, trading that the Treasury Department considered suspicious enough to warrant an investigation.
Reporters had been briefed about the decision on the long bond at 9am that day, on condition that the information not be released until a 10am announcement. Pete Davis, an investment consultant who attends Treasury news conferences, said on Nov. 2 that he had provided clients with details of the decision before 10am. Goldman Sachs has said it was one of his clients.
"I thought I was dealing with people who were writing analytical pieces who would honor the embargo for release time," Davis, 51, president of Davis Capital Investment Ideas in Washington.
Davis received a so-called Wells notice telling him that the staff of the SEC was considering civil securities fraud charges in connection with his disclosure of the Treasury's plans. Such a notice offers him an opportunity to present arguments. Brad Bennett, Davis' lawyer, declined to comment, the news service said.
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