Goldman Limits Facebook Investment to Foreign Clients

Just more than a week after Goldman Sachs offered its most prized clients a chance to invest in Facebook, the firm on Jan 17 withdrew the opportunity from clients in the United States because of worries that the deal could run afoul of securities regulations.

The decision is a considered a serious embarrassment for Goldman, which had marketed the investment to its wealthiest clients, including corporate magnates and directors of the nation’s largest companies. The offering was supposed to have been a triumph for the firm, which is trying to move past run-ins with regulators, including a $550 million settlement with the Securities and Exchange Commission last summer over a complex mortgage investment. But the Facebook plan is now likely to raise new questions about whether Goldman tried to push regulatory boundaries once again. Goldman made its decision after the investment plan drew scrutiny. The SEC had opened an inquiry into the structure of the offering and whether it violated the law because of widespread news coverage. Federal and state regulations prohibit what is known as “general solicitation and advertising” in private offerings. Firms like Goldman seeking to raise money cannot take action that resembles public promotion of the offering, like buying ads or communicating with news outlets.