The Financial Industry Regulatory Authority (FINRA) penalized Goldman Sachs $3 million for failing to properly mark almost 60 million short sell orders as long and associated supervision deficiencies.
In addition, the company consented to receive a censure as part of FINRA's discipline, which was announced on Tuesday. The conclusions of the self-regulatory group were not confirmed nor denied by Goldman Sachs.
According to FINRA, Goldman Sachs' automated trading software incorrectly flagged sell orders between 2015 and 2018 as a result of a system upgrade meant to streamline order processing.
According to FINRA, "Goldman inadvertently failed to include a single line of code that was designed to copy the long or short mark from a parent sell order and affix it to the instantaneously created child sell order(s) that were routed to the market. While the parent orders were accurately marked as short sales and a locate was obtained for each, the child orders did not receive the short sale order mark of the parent order due to the missing line of code."
These errors allegedly broke Regulation SHO and FINRA guidelines for accurately submitting transaction reports and keeping order memoranda. The company was also blamed for not monitoring its trading system, which resulted in the incorrect execution of around 7.9 million orders and more than two million trade reports filed to FINRA, according to the organization.
In April 2018, FINRA allegedly informed Goldman Sachs of flaws in its trading software. According to FINRA, the company immediately corrected the coding problem.
In addition, Goldman Sachs fixed a flaw in its logic system for selling orders sent to the company by overseas affiliates after FINRA alerted the company to the problem in October 2019.
According to FINRA, Goldman Sachs improved its order marking surveillance reports in 2019 and included new procedures intended to find and stop the routing of orders for short sales that were incorrectly marked.
Goldman Sachs opted not to comment immediately.
By fLEXI tEAM