The Financial Industry Regulatory Authority (FINRA) said it fined Goldman Sachs $650,000 for failing to disclose that two of its registered representatives had received Wells Notices, which indicate that investigations of operating practices are under way.
One of the notices involved Fabrice Tourre and was issued in connection with the Securities and Exchange Commission's (SEC) investigation of Goldman’s offering of a synthetic CDO called ABACUS 2007-ACI.
The SEC in July announced that Goldman Sachs would pay $550 million and reform its business practices to settle SEC charges that Goldman omitted key facts regarding that CDO.
The SEC continued to pursue litigation against Tourre, a vice president at Goldman. A motion by Tourre to dismiss the SEC suit was dismissed.
FINRA did not name the other Goldman representative.
Firms are required to update a representative's regulatory record by filing a Form U4 reporting the receipt of a Wells Notice within 30 days of learning of the Notice. In Tourre's case, his Form U4 was not amended until May 3, more than seven months after Goldman learned of his Wells Notice, and only after the SEC filed a complaint against Goldman and Tourre on April 16.
FINRA found that Goldman did not have adequate supervisory procedures and systems in place to ensure that required disclosures were made .
"Goldman's failures impacted the ability of FINRA and other securities regulators to discharge their registration, examination and oversight duties, and limited the ability of investors and other market participants to adequately assess the individuals through FINRA's public disclosure program, BrokerCheck," said James S. Shorris, FINRA executive vice president and acting chief of Enforcement.
Individuals at Goldman were promptly informed of the receipt of the Wells Notices by the outside counsel for both employees, but they subsequently failed to notify the Goldman compliance unit charged with updating Forms U4. The second registered individual subsequently was not named in an SEC complaint.
As part of the settlement, Goldman also agreed to review its supervisory procedures and systems in the reporting area and to implement and document any necessary remedial measures.
In concluding this settlement, Goldman neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
"We are pleased to have put this matter behind us,'' said Michael DuVally, vice president of media relations at Goldman Sachs