Goldman Sachs Fined for Failing to Detect Market Manipulation
Goldman Sachs, one of the world’s largest investment banks, has been fined over $500,000 by the Financial Industry Regulatory Authority (FINRA) for its failure to adequately monitor trading activities, including potential cases of market manipulation.
Failure to Include Securities in Surveillance Reports
According to FINRA, between February 2009 and April 2023, Goldman Sachs neglected to include warrants, rights, units, and certain OTC equity securities in nine surveillance reports designed to detect manipulative trading. The bank failed to identify these securities for an extended period ranging from two years to over 12 years.
Lapses in Surveillance Reports
The regulatory body found that Goldman Sachs omitted warrants from October 2010 to March 2021 and rights and units from October 2010 to April 2022 in a surveillance report meant to identify potential wash trades. Additionally, the bank left out various securities in its reports from February 2009 to April 2018 that would have caught potential instances of marking the open and marking the close – a market manipulation technique.
Impact on Supervisory Reviews
Due to these reporting lapses, Goldman Sachs was unable to conduct supervisory reviews for possible cases of market manipulation. The nine affected reports could have identified approximately 5,000 alerts for potentially manipulative trading activity during the specified period.
Censure and Fine
In response to FINRA’s findings, Goldman Sachs agreed to a censure and a fine of $512,500. The bank did not admit or deny the findings but has taken remedial steps by including the missing trading details in the surveillance reports since April 2023.
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