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Thursday, March 28, 2024 | Back issues
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Goldman Sachs Under Fire From Schwab, TD Ameritrade

TD Ameritrade and Charles Schwab sued Goldman Sachs on Thursday to prevent the investment giant from severing a 17-year old securities investment agreement.

MANHATTAN (CN) - TD Ameritrade and Charles Schwab sued Goldman Sachs on Thursday to prevent the investment giant from severing a 17-year old securities investment agreement.

The suit, which was filed in Manhattan Supreme Court by the firms Kaplan Rice and Friedman Kaplan, says Goldman Sachs falsely claimed that its agreement to provide shares in initial public offerings from new companies expired in 2007, and that the investment company was no longer obligated to provide that access for the plaintiffs’ investors.

Charles Schwab and TD Ameritrade concede that some components of the agreement expired in 2007, namely an agreement to share market research.

As for the larger agreement to share access to new stocks, however, the complaint says this deal remains in perpetuity.

“That governing agreement, the distribution agreement, was entered into in 2001, and – unlike other contracts entered into between the same parties at roughly the same time – does not expire on a date certain and does not contain any provision for its termination at will, and the parties’ course of conduct over the past 17 years confirms that the parties have appropriately treated the agreement as continuing so long as there are shares for Goldman Sachs to allocate,” the complaint states.

The deal between the three parties began in 2001 when Goldman Sachs acquired Epoch Partners from Schwab, TD Waterhouse and Ameritrade. Epoch was an online investment bank that allowed investors to directly obtain shares in new companies.

As part of the acquisition deal, Goldman Sachs agreed to continue providing shares from initial public offerings to the three former owners of Epoch.

Ameritrade and TD Waterhouse merged in 2006, when Ameritrade acquired the later company and changed its name to TD Ameritrade.

Representatives for Goldman Sachs did not respond to an email seeking comment.

Categories / Business, Financial

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