GOLDMAN Sachs will pay $US550 million and reform its practices to settle charges the firm misled investors in a subprime mortgage product.

Goldman agreed to settle the charges without admitting or denying the allegations "by consenting to the entry of a final judgement that provides for a permanent injunction from violations of the antifraud provisions of the Securities Act of 1933," according to the SEC's release.

In a brief disclosure prior to the release, the SEC said, "The SEC Enforcement Division is holding a news conference at 4:45 p.m. ET to make a significant announcement." Attending would be Enforcement Director Robert Khuzami in the regulators' headquarters in Washington, D.C.

Prior to the release, a spokesman for Goldman Sachs declined to comment on speculation about a potential settlement or the firm's stock price.

Goldman Sachs has faced a firestorm of negative publicity since the SEC announced the lawsuit against the Wall Street firm and one of its traders, Fabrice Tourre, nearly three months ago over the sale of a collaterised debt obligation, known as Abacus 2007-AC1.
Shares of Goldman Sachs closed up $US6.16, or 4.4 per cent, at $US145.22. In after-hours trading the stock soared an additional 4 per cent.

Goldman Sachs' share price has dropped 21 per cent since the lawsuit was announced on April 16.

This article is available in full at The Australian.