Goldman Sachs (NYSE: GS) has apparently agreed to invest up to $65 million in Management Dynamics, which makes software to automate international transactions. The investment gives Goldman the right to place one employee on the New Jersey company's board.

Specifically, the investment comes from Goldman's Special Situations Group. That of course raises questions about how the company interprets the Volcker Rule, which restricts proprietary investments. While the firm has been willing to cut proprietary trading units, it has been a bit fuzzier when it comes to principal investments. Frankly, as Dodd-Frank continues to unfold, it remains unclear if principal investments are covered.

In any case, the bank has characterized its Special Situations Group as mainly a lending outfit.

Bloomberg also notes that "Goldman Sachs in January changed the way it reports financial results, creating a division called Investing and Lending. The special situations group has moved most of its holdings out of the firm's fixed-income, currencies and commodities division into the new segment. Investing and Lending contributed 19 percent of Goldman Sachs's 2010 revenue, making it the second-largest division on that basis after institutional client services, or sales and trading."

Given Goldman's adroit and quite enviable use of principal investments as an earnings driver in the past, it would make sense for the firm to want to maintain this sort of business. But Goldman has to make it mesh with the Volcker Rule. My guess is it ultimately will, one way or another.

For more:
- here's the Bloomberg article

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