FINRA Fines Goldman Sachs $512,500 for Alleged Surveillance Failures in Monitoring Securities

The Financial Industry Regulatory Authority (FINRA) has imposed a fine of $512,500 on Goldman Sachs for purportedly neglecting to adequately monitor certain types of securities for potential manipulative trading activity over a span of more than ten years. FINRA's decision notice, published on Tuesday, revealed that Goldman Sachs failed to include warrants, rights, units, and certain over-the-counter (OTC) equity securities in nine automated surveillance reports from February 2009 to April 2023. These securities were excluded from the reports for periods ranging from two to over twelve years, according to the self-regulatory organization. Notably, among the surveillance reports that omitted these securities were those focused on wash trading and marking the open and close of trades.

Approximately 5,000 alerts were impacted by the oversight, as per FINRA. The organization identified these omissions during cross-market surveillance activities. In addition to the failure to include these securities in surveillance reports, Goldman Sachs was found to lack a policy for reviewing automated surveillance reports to ensure they encompassed all relevant securities traded by the firm, according to FINRA. However, the firm took steps to address the issue in February 2021 by implementing reviews to identify any inadvertently excluded securities from new or modified surveillance reports.

Goldman Sachs rectified the situation by either adding the omitted securities to relevant surveillance reports in response to FINRA's investigation or through the adoption of new surveillance reports, completing the remediation process by April 2023, FINRA confirmed. This recent fine follows previous penalties imposed on Goldman Sachs by FINRA, including a $425,000 settlement in August for reporting and supervision violations related to OTC options positions. The firm has faced similar penalties from FINRA in 2017 and 2012 for alleged reporting deficiencies.

In April, Goldman Sachs was fined $3 million by FINRA for inaccurately marking nearly 60 million short sell orders as long and associated supervision failures. A spokesperson for Goldman Sachs declined to provide a comment on the matter.

By fLEXI tEAM