Goldman Sachs to pay over half a million dollars in fines for failing to monitor trades properly

Banking giant Goldman Sachs was recently fined by the Financial Industry Regulatory Authority (FINRA) for failing to adequately monitor trading activity in certain securities over a prolonged period of time. The regulator has issued a $512,500 fine after finding that the bank failed to perform this duty from February 2009 until mid-April 2023.

For nearly a decade and a half, Goldman failed to include warrants, certain OTC equity securities, units, and rights in automated surveillance reports. These reports are used to detect manipulative trading by both the company and its customers.

Goldman consented to the sanctions without admitting or denying guilt

According to FINRA, the mentioned securities were excluded from monitoring over different periods, but mostly ranging from 2 to more than 12 years. The regulator has estimated that around 5,000 alerts for manipulative trading were undetected as a result.

The announcement added: “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.”

In the meantime, Goldman has taken remedial actions, which includes adding all of the mentioned securities to the affected reports. It also implemented additional reviews to ensure that no other assets are being excluded from monitoring and reporting. However, it will still have to pay the fine, and on top of that, it was censured for the supervisory failures.

Goldman addressed the matter in an official document, but it neither admitted nor denied guilt or FINRA’s findings. It simply consented to the sanctions, and has undertaken to pay the fine following FINRA’s acceptance of the “Letter of Acceptance, Waiver, and Consent.”

Goldman Sachs has a long history of violations and resulting fines

The issue is severe, as the surveillance gaps marked the violations of NASD Rule 3010, as well as FINRA Rules 3110 and 2010. Said rules require broker-dealers to oversee systems reasonably designed to achieve compliance with the standing laws and regulations involving securities.

Goldman Sachs has been a FINRA member since 1936, and it acted as a major financial services company that offers securities, investment banking, and investment management, among other services. Even so, the company did have troubles with regulators on more than one occasion over the years.

The most recent one was less than a year ago, in April 2023, when Goldman had to pay a $3 million fine for mismarking over 60 million short sale orders as “long” for the period between October 2015 and April 2018.

Before that, FINRA barred Brian Maguire, Goldman’s former research analyst, from the industry over insider trading violations. And before that, in 2017, FINRA also fined Goldman another $2.5 million for failure to report conventional options positions between 2010 and 2016.