Goldman Sachs Fined $15 Million After Alleged Violations of Federal Regulations
Goldman, Sachs & Co. has been charged by the Securities and Exchange Commission after allegations regarding improper securities lending practices. In order to settle the charges, Goldman Sachs agreed to pay $15 million.
According to the SEC, brokerage firms like Goldman Sachs are commonly asked to locate short-selling stocks for investors. If granted, this means that the firm in question has borrowed, intends to borrow, or believes it can borrow the security in order to complete the short sale.
Goldman Sachs allegedly violated Regulation SHO when they improperly provided customers with locates without reviewing the securities to be located. They accusations state that the locates were inaccurately recorded in Goldman Sachs’ locate logs. The SEC alleges that employees of the firm’s Securities Lending Demand Team would process customer locate requests using what was known as a “fill from autolocate” system. When prompted, this system allegedly allowed employees to grant locate requests based on start-of-day inventory reported by large financial institutions. This was done despite the automated system already showing the inventory had been depleted.
Further findings by the SEC indicate that Goldman Sachs allegedly failed to sufficiently differentiate the locates filled by the automated model and the locates the Demand Team filled using the “fill from autolocate” system. Goldman Sachs is accused of providing inaccurate documentation of its Regulation SHO compliance.
The SEC order censures Goldman Sachs and institutes a cease and desist regarding any future violations of Section 17(a) of the Exchange Act and Rule 203(b)(1) of Regulation SHO.