Now that keeping secrets about an investor has landed Goldman Sachs in hot water with the Securities and Exchange Commission (SEC), a new disclosure issue has arisen. The question, in a nutshell, is: why didn't Goldman tell its investors that it was being investigated?

In a conference call on Tuesday, Goldman general counsel Gregory Palm first defended the company against the SEC's fraud suit. He said Goldman was not legally required to disclose that an investor that helped choose a portfolio of subprime mortgage debt was taking a short position – meaning that the investor was betting the portfolio would lose money.

Then Palm had to defend the company against some of its own investors, who wanted to know why they had not been told about the SEC's investigation. The probe became serious when the SEC served a so-called Wells notice on Goldman in mid-2009.

Until the agency filed suit last week, Goldman's annual and quarterly financial reports contained no mention of the SEC's investigation or the Wells notice. The reports alluded only generally to requests for information about subprime mortgages that most financial service firms were receiving from various government agencies.

On Tuesday one investor/caller asked Palm if there were "other Wells notices out there on this or other issues?"

Palm explained, "As a matter of policy we do not disclose every Wells notice we get. We disclose it only if we consider it to be material."

"Obviously," the investor/caller shot back, "you didn't think this one was material."

The SEC has no set policy on whether Wells notices should be disclosed as a material fact to investors. Legal experts say that materiality is a murky issue, and usually is decided in court only after kept-in-the-dark investors file suit.

"If Goldman's argument was that the Wells notice was not material, they may see some challenges from other very large companies that have disclosed Wells notices in the past," suggested a legal blog called Footnoted.org. It cited General Electric, Bank of America and JPMorgan Chase, among other examples.

If regulators are looking at other Goldman deals, Palm isn't saying. In Tuesday's conference call, another investor tried to pin Palm down this way: "How many of your [subprime] transactions has the SEC concluded reviews of so far?"

Palm replied, "For the past 18 months the SEC has been looking generally at our mortgage deals, with particular focus on this one. That's all I can say on it right now."

The caller didn't give up. "Are there others where repeated back-and-forth dialogue [with the SEC] could result in charges?" he asked.

Palm dodged. "The one case brought is all we know right now," he said.

This article first appeared on Corporate Counsel, a US sister title of Legal Week.