LONDON — A British watchdog hit the iconic but controversial Wall Street bank Goldman Sachs with a huge fine of £17.5 million yesterday, for information failures tied to US fraud charges.
The Financial Services Authority said the fine, equivalent to $27 million or 21 million euros, was for “weaknesses in controls resulting in failure to provide FSA with appropriate information”.
The penalty was handed down to Goldman’s London-based arm Goldman Sachs International (GSI). A spokesperson for the bank said it was “pleased the matter is resolved”.
The fine is one of the biggest handed out by the FSA, and is also the latest of a series of incidents to tarnish the once revered name of Goldman Sachs.
The penalty relates to failure by Goldman to disclose that it was under investigation for fraud by the US financial watchdog earlier this year, a statement said.
“GSI did not set out to hide anything, but its defective systems and controls meant that the level and quality of its communications with the FSA fell far below what we expect of an authorised firm,” said the watchdog’s managing director of enforcement and financial crime, Margaret Cole.
The penalty comes after Goldman Sachs paid 550 million dollars in July to settle the fraud charges brought by the US regulator, the Securities and Exchange Commission (SEC). The FSA had in April announced that it was launching a probe into Goldman which was linked to the charges brought by the SEC, alleging fraud over the way the bank sold a subprime mortgage investment.
The British fine also relates to Goldman’s failure to tell the British regulator that Fabrice Tourre, an executive linked to the investment product, was under investigation.
This was relevant because Tourre transferred from the United States to London, and so had to be authorised by the FSA. “We have repeatedly stressed the importance of firms self-reporting regulatory issues to the FSA in a timely way,” said Cole.
“This penalty should send a message — particularly to the senior management of large institutions — of the need to have their firm’s UK reporting obligations at the forefront of their minds.”
In its fraud charges, the SEC accused Goldman of allowing a prominent hedge fund — Paulson & Co Inc — to put together a package of subprime mortgages which were sold to clients, but which Paulson was also betting against. After agreeing to the settlement with the SEC, the investment bank admitted it had made a “mistake” and given “incomplete” information to clients. — AFP