Goldman Sachs 2015 Annual Report Download - page 53

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Responding to these investigations and lawsuits, regardless
of the ultimate outcome of the proceeding, is time-
consuming and expensive and can divert the time and effort
of our senior management from our business. Penalties and
fines sought by regulatory authorities have increased
substantially over the last several years, and certain
regulators have been more likely in recent years to
commence enforcement actions or to advance or support
legislation targeted at the financial services industry.
Adverse publicity, governmental scrutiny and legal and
enforcement proceedings can also have a negative impact
on our reputation and on the morale and performance of
our employees, which could adversely affect our businesses
and results of operations.
Substantial legal liability or significant regulatory
action against us could have material adverse
financial effects or cause us significant reputational
harm, which in turn could seriously harm our
business prospects.
We face significant legal risks in our businesses, and the
volume of claims and amount of damages and penalties
claimed in litigation and regulatory proceedings against
financial institutions remain high. See Note 27 to the
consolidated financial statements in Part II, Item 8 of the
2015 Form 10-K for information about certain legal
proceedings in which we are involved and Note 18 to the
consolidated financial statements in Part II, Item 8 of the
2015 Form 10-K for information regarding certain
mortgage-related contingencies. Our experience has been
that legal claims by customers and clients increase in a
market downturn and that employment-related claims
increase following periods in which we have reduced our
staff. Additionally, governmental entities are plaintiffs in
certain of the legal proceedings in which we are involved,
and we may face future actions or claims by the same or
other governmental entities, as well as follow-on civil
litigation that is often commenced after regulatory
settlements.
Recently, significant settlements by several large financial
institutions with governmental entities have been publicly
announced. The trend of large settlements with
governmental entities may adversely affect the outcomes for
other financial institutions in similar actions, especially
where governmental officials have announced that the large
settlements will be used as the basis or a template for other
settlements. The uncertain regulatory enforcement
environment makes it difficult to estimate probable losses,
which can lead to substantial disparities between legal
reserves and subsequent actual settlements or penalties.
Certain regulators, including the SEC, have announced
policies that make it more likely that they will seek an
admission of wrongdoing as part of any settlement of a
matter brought by them against a regulated entity or
individual, which could lead to increased exposure to civil
litigation, could adversely affect our reputation, could
result in penalties or limitations on our ability to do
business in certain jurisdictions with so-called “bad actor”
laws and could have other negative effects.
In addition, the U.S. Department of Justice has announced a
policy of requiring companies to provide investigators with
all relevant facts relating to the individuals responsible for
the alleged misconduct in order to qualify for any
cooperation credit in civil and criminal investigations of
corporate wrongdoing, which may result in our incurring
increased fines and penalties if the Department of Justice
determines that we have not provided sufficient
information about applicable individuals in connection
with an investigation, as well as increased costs in
responding to Department of Justice investigations. It is
possible that other governmental authorities will adopt
similar policies.
Goldman Sachs 2015 Form 10-K 41