UK launches formal probe into Goldman Sachs

Britain's financial regulator started a formal enforcement investigation into Goldman Sachs on Tuesday, four days after US regulators filed a fraud case against Wall Street's biggest investment bank.

"Following preliminary investigations the Financial Services Authority (FSA) has decided to commence a formal enforcement investigation into Goldman Sachs International in relation to recent SEC allegations. The FSA will be liaising closely with the SEC in this review," the UK regulator said in a short statement.

The US Securities and Exchange Commission has accused Goldman of hiding from investors the fact that US hedge fund Paulson was betting against a subprime mortgage product that it helped create.

Goldman has denied the charges. The bank reports quarterly results later on Tuesday.

The FSA's move draws it into what promises to be one of the biggest legal rows in recent banking history, and both the SEC and Goldman are expected to come out fighting.

In documents submitted to the SEC last year, the bank said the regulator was using "the benefit of perfect hindsight" about the magnitude of the sub-prime housing crisis. The SEC notified Goldman in August through an official "Wells Notice" that it was facing a civil liability case.

The documents, a copy of which were seen by Reuters, told the SEC in September that if the matter was litigated a fuller record "will underscore that no one in fact considered Paulson's role important and that no one was misled."

Goldman Sachs shares traded in Frankfurt were up 3.9 per cent at 0949 GMT.

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