I use the word “Mess” intentionally because there is so much noise surrounding the SEC’s actions – the timing of the charges, whether other firms will be charged, etc. In fact, I would venture to guess that few people know what the actual charges are! They just know that another large Wall Street firm is in the news – and not for a good reason.

So here are my thoughts on the matter:

10 – This is not an isolated incident – more dealers such as Goldman Sachs will be charged in the weeks and months to come; I wouldn’t be surprised if Goldman is charged in other cases as well.

9 – The greatest risk to Goldman Sachs is its reputational risk – not whatever fines they have to pay or other actions are filed (by New York Sate for example).

8 – Without passing judgment on Goldman Sachs’ culpability, the firm will survive this, and while they may lose some clients shorter-term, it will not significantly impact their long-term business. But their reputation and standing as an industry icon is diminished, regardless of the eventual outcome.

7 – The timing of these charges is suspect at best – coming in the middle of the financial reform debate and on the same day that the SEC is faulted for its handling of the Stanford Scandal and other cases. The SEC is attempting to revive its reputation and, as mentioned above, this is just the first of many announcements to come.

6 – While few oppose the idea of financial reform, I fear that the public outcry and political posturing will turn the debate and eventual regulation into more than it should be. Adding further bureacracy – as seems likely – is not the answer.

5 – It is not about the level of sophistication of the client – it is about the fiduciary responsibility for full disclosure. In fact, the mantra of our industry must be “Disclosure, Disclosure, Disclosure.”

4 – This and similar cases will demonstrate how little upper management at many firms really understand some of the most sophisticated derivatives products that they are selling – and that in and of itself is pretty scary!

3 – The actions of a few (individuals and firms) will continue to tarnish the reputation of the industry and the “us v. them” argument will continue in the headlines through this and perhaps the next election cycle.

2 – Proactive client service is more important than ever – need I say more?

1 – Did I mention the importance of disclosure?