Goldman will pay $550M to settle SEC charges

WASHINGTON (Reuters)—Goldman Sachs Group Inc. agreed to pay $550 million to regulators to settle civil fraud charges over how it marketed a subprime mortgage product, ending a weeks-long probe that rattled clients and weighed on its share price.

The investment bank paid the largest settlement against a financial services firm with the U.S. Securities and Exchange Commission. But many investors viewed the $550 million as just a slap on the wrist for a bank that earned more than $13 billion last year.

Goldman's shares rose 4.2% after the market closed, after rising 4.4% late in the day on reports that the bank was settling.

The SEC accused Goldman of creating and marketing a debt product linked to subprime mortgages without telling investors that a prominent hedge fund helped choose the underlying securities and was betting against them.

Goldman acknowledged as part of the settlement that its marketing materials were incomplete. Of the $550 million settlement, $250 million will be returned to harmed investors, and $300 million will go to the U.S. Treasury.

The settlement is subject to approval by a federal judge.