The Financial Industry Regulatory Authority (FINRA) has fined Goldman Sachs $512,500 for failing to supervise trading activity in certain securities reasonably over an extended period.
FINRA found that from February 2009 until mid-April 2023, Goldman failed to include warrants, rights, units, and certain over-the-counter (OTC) equity securities in automated surveillance reports used to detect potentially manipulative trading by the firm and its customers.
Goldman Sachs Fined $512,500 by FINRA for Supervisory Failures
According to the document published by FINRA this week, the excluded securities were not monitored in the affected reports for periods ranging from 2 to over 12 years. An estimated 5,000 alerts for potentially manipulative trading activity went undetected due to the gaps in surveillance.
"As a result, the firm failed to detect that nine surveillance reports for potentially manipulative trading excluded warrants, rights, units, and certain OTC equity securities," the FINRA's announcement stated.
Goldman has taken remedial actions, including adding the missing securities to all affected reports and implementing additional reviews to prevent exclusions. On top of the fine, Goldman was censured for the supervisory failures.
In the official document, Goldman neither admitted nor denied FINRA's findings but consented to the sanctions. The firm has undertaken to pay the monetary fine upon FINRA's acceptance of the "Letter of Acceptance, Waiver and Consent."
The surveillance gaps constituted violations of NASD Rule 3010 and FINRA Rules 3110 and 2010, which require broker-dealers to have supervisory systems reasonably designed to achieve compliance with securities laws and regulations.
Mild FINRA Sanctions for Goldman Sachs
Goldman has been a FINRA member since 1936. It is a major financial services firm offering investment banking, securities, investment management and other financial services. Over the years, the firm has faced scrutiny from the regulator several times.
Most recently, in April 2023, Goldman paid a $3 million fine to settle charges of mismarking over 60 million short sale orders as "long" between October 2015 and April 2018. About 8 million of those orders, amounting to over a billion shares, were executed in violation of U.S. securities laws and FINRA rules.
In 2021, FINRA barred former Goldman Sachs research analyst Brian Maguire from the industry for insider trading violations. Trading on material non-public information is a federal crime in the United States.
Additionally 2017, FINRA fined Goldman $2.5 million for failing to report its conventional options positions from 2010 to 2016 fully. The firm further exceeded position limits in three securities over a four-year period. FINRA found Goldman lacked adequate supervision to ensure compliance.
