In almost all jurisdictions around the world there is the concept of fraud. In the US at the moment, the has been a landmark movement to charge employees of the Goldman Sachs organisation with fraud over representations that they made in relation to the sale of collateralised debt obligations (CDOs) which are the complex financial instruments that are largely cited as the where the genesis of the global financial crisis began. The individual who has been charged is Fabrice Tourre who is aged 31 years onle and is a registered representative of the bank. He was based in New York city, working on the project that is being questioned by the SEC in relation to this charge at the time. He has, however, moved on to London as Executive Director of Goldman Sachs International. He is charged with breaches under Section 17(a)(1), (2) and (3) of the Exchange Act [15 U.S.C. § 77q(a)(1), (2) & (3)] and Section 10(b) of the Exchange Act [15 U.S.C § 78j(b)]. The first set of charges relate to a largely procedural element of the law in relation to brokers but the second part relates to manipulative and deceptive devices which are used to obscure the true position of an investment and therefore induce the public to invest in products which are in reality much less likely to succeed as investments than a broker or dealer claims. It in particularly relates to the concept of a short sale which is a technique that was employed by Goldman Sachs staff to make enormous profits for the bank, usually at the expense of their clients.
In a sense, this is akin to fraud and is and the penalty that the regulator is seeking is to have an injunction preventing the individual from trading in relation to these matters in the future. The deceptive element of this act though is very similar in nature to the concept of fraud which is used in most jurisdictions. For instance, in New South Wales in Australia, fraud is largely framed as the crime of obtaining a benefit by deception. It is this element of deception which appears to be common to all allegations of fraud.
