As per SEC rule, private placements like the Facebook deal cannot be the subject of advertising, general promotional seminars or public meetings in connection with the offering.
According to media reports, SEC officials are examining whether the deal should be deemed a public offering.
In the worst-case scenario, if the SEC deemed the private placement improper, it could try to force Goldman to buy back all the shares it sold, after the deal is completed.
Goldman expects to raise $1.5bn for social networking site Facebook.
The Wall Street Journal has reported that over $7bn in orders have poured in from foreign investors, or more than $4 for every $1 in shares being sold.
The change is expected to hurt Goldman’s ties to some of its most lucrative US clients.
Goldman in a statement said they regret the consequences of this decision, but Goldman Sachs believes this is the most prudent path to take.
Facebook has already has received a $450m investment from Goldman Sachs and $50m from Russian investment firm Digital Sky Technologies, in a deal that valued the company at $50bn.
