For Goldman Sachs' wealth management clients, it seemed like an extraordinary opportunity to get in on the Facebook phenomena at a relatively early stage. Through their controversial broker, they had what amounted to exclusive access to a hot private placement. But the regulatory scrutiny in the immediate aftermath of the deal announcement was intense, and now Goldman has been forced to renege.

Domestic clients will not be able to invest in the deal after all. Goldman has decided that the regulatory risks are too much.

There were potentially two issues weighing on the minds of executives. Private placements can be sold via private communications only; advertising is a big no-no. But all the publicity surrounding the deal could easily be seen by regulators as advertising for all intents and purposes. So, now Goldman plans to allow only foreign investors to get in on the action.

Many assume the SEC weighed in and forced the bank to take this action, but the bank says that is not true. It certainly wants to play it safe from a regulatory point of view.

But what a disappointment for Goldman Sachs clients. The bank now has some fences to mend.

For more:
- here's a Los Angeles Times article
- here's the bank's announcement via Deal Journal

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