Goldman Sachs will pay a $22 million fine to settle charges that it allowed a select group of investor clients to get tip-offs on equity research, US regulators said on April 12.
The Securities and Exchange Commission charged Goldman with failure to address the risk that during weekly "huddles", its analysts could share valuable non-public information about its research recommendations for clients.
"Huddles were a practice where Goldman's stock research analysts met to provide their best trading ideas to firm traders and later passed them on to a select group of top clients," the US market watchdog said in a statement.
From 2006 to 2011, Goldman held weekly huddles occasionally attended by sales personnel in which analysts discussed their top short-term trading ideas and traders discussed their views on the markets. In 2007, the SEC said, Goldman began a program known as the Asymmetric Service Initiative in which analysts shared information and trading ideas from the huddles with select clients.
The risks from these information exchanges were increased by the fact that many of the clients and traders engaged in frequent, high-volume trading, the regulator noted.
"Higher-risk trading and business strategies require higher-order controls," said Robert Khuzami, chief of SEC enforcement. "Despite being on notice from the SEC about the importance of such controls, Goldman failed to implement policies and procedures that adequately controlled the risk that research analysts could preview upcoming ratings changes with select traders and clients," he said. Under the terms of the settlement, Goldman will pay a $22 million penalty, $11 million of which will be paid to the Financial Industry Regulatory Authority in a related proceeding.
Goldman neither admitted nor denied the charges, except for special elements, the regulators said.
Comments
Comments are closed.