Finra fines Goldman Sachs $3 million for mislabeling sell orders
The Financial Industry Regulatory Authority continues to take disciplinary actions against financial services firms for providing inaccurate securities trading information.
Today, the industry’s self-regulatory authority ordered Goldman Sachs to pay a fine of $3 million for various reporting lapses over a period of at least three years.
FINRA said Goldman Sachs was fined for mislabeling nearly 60 million short sell orders as long and related supervision failures. From October 2015 to April 2018, the company mismarked orders totaling more than 14 billion shares, which impacted market data and potentially led to financial losses for investors. This in turn led to the incorrect marking of Goldman Sachs’ customer transactions for at least 30 months.
During this period, the company executed nearly eight million of those orders, totaling more than a billion shares. Due to the inaccurate “long” mark, 12,335 of the executed orders were filled at or below the best bid. Further, the company violated some rules which impose a circuit breaker on short sales that when triggered, and permits short selling only at a price above the current national best bid.
These mismarked orders also caused the firm to submit inaccurate trade reports to FINRA and maintain inaccurate books and records. Separately, Goldman misapplied the order marking logic to sell orders routed by a foreign affiliate, which labelled those orders inaccurately as short.
The U.S. regulator said during the period of review that Goldman Sachs did not have adequate systems and controls in place to detect and prevent the violations. In addition, FINRA’s latest fine was stipulated on repeated failures in accurately submitting required trade reports to the appropriate FINRA Trade Reporting Facility (TRF).
“From October 2015 to April 2018, Goldman mismarked 59,981,252 short sell orders as long, of which 26,944,700 were sent to an alternative trading system (ATS). These orders represented less than one percent of Goldman’s total principal sell orders during this time period. The orders were auto-generated to promptly hedge the Synthetic Product Group’s (SPG) synthetic risk exposure resulting from its execution of equity swap transactions with clients. The mismarked orders were caused by Goldman’s implementation of an upgrade to the relevant automated trading software that was intended to simplify this order flow,” the statement reads.
Goldman Sachs consented to Finra’s order without admitting or denying the findings. In addition to paying the penalty, the company agreed to be censured and must cease and desist from further violations.
