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FSA fines Goldman Sachs £17.5m

The Financial Services Authority has handed a £17.5m fine to Goldman Sachs International for failing to tell the regulator it was under investigation in the US.

The FSA began its investigation in April after the US Securities and Exchange Commission charged Goldman with misleading investors.

The regulator says that Goldman Sachs International failed to ensure it had adequate systems and controls to enable it to comply with its UK regulatory reporting obligations, it says that this resulted in a failure to notify the FSA in matters over the SEC investigation.

Trader Fabrice Tourre was accused of being at the centre of the SEC investigation into Goldman Sachs, which looked into the alleged misselling of a complex parcel of toxic mortgages, known as Abacus, to the bank’s own clients while another client, hedge fund Paulson & Co, was shorting them. Tourre is still fighting  charges brought against him by the SEC.

In August 2008, the SEC began investigating Goldman Sachs & Co, GSI’s US affiliate, regarding Abacus. The next year saw the SEC obtain documents from both the GSC and GSI. The FSA says that despite the involvement of the GSI in marketing Abacus and the involvement of UK approved people in the investigation, no one at GSC or GSI considered the potential regulatory implications for the GSI.

The FSA says Goldman also did not tell them that Fabrice Tourre was under investigation. A Wells Notice, which is an indication that from the SEC staff that the SEC file an enforcement action, was issued in September 2009, several members of GSI were aware of the fact. Tourre moved from the US to London in November 2008 whilst the investigation was ongoing, therefore falling under the FSAs remit. He was removed from the FSA register in April this year.

GSI’s compliance department only became aware of the SEC investigation when, on April 16, 2010, the SEC announced that it had commenced enforcement proceedings in the US courts against GSC and Tourre alleging that they had committed serious violations of US securities law by making misleading statements and omissions in connection with the Abacus transaction.

The bank settled the charges with SEC for a sum of $550m in July 2010.

FSA managing director of enforcement and financial crime Margaret Cole says: “We have repeatedly stressed the importance of firms self-reporting regulatory issues to the FSA in a timely way.  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.  The fact that senior business people at GSI in London knew about Mr Tourre’s Wells Notice, but did not consider the obvious regulatory implications for GSI is very disappointing. Had GSI complied with its UK obligations, the outcome for it would have been very different.

“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.”

The FSA investigation found that GSI did not deliberately withhold any information from the FSA. GSI co-operated fully and agreed to settle at an early stage. In doing so it qualified for a 30 per cent discount. Without the discount the fine would have been £25m.

JPMorgan was the recipient of the largest fine given by the FSA when it paid £33.3m in July 2010 for failing to keep client money in separate accounts.


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. GS must be shaking in their boots! How does the FSA come up with such a number and what will they do with it once it is paid? No doubt we will hear another commanding comment from Margeret Cole about how this will send a message to all and sundry about the power of the FSA. Yawn Yawn!

  2. The FSA is in massive debt for overspending, yet they have been handing out more fines than a London trafficwarden.

    What happens to the millions of pounds that have been paid by brokers, IFA’s, and lenders??? I hope it doesn’t go to the FSA to service its spiralling debts? If so, surely there is a conflict of interest?

    Hopefully this money goes to charity 🙂

  3. Would somebody PLEASE tell me where is all this fine money going??
    Also is it not true that the public will pay for all these fines one way or another?
    What is the FSA trying to acheive do they think that the fine is a deterrent?

  4. Operation Barbarossa was the name given to Nazi Germany’s invasion of Russia on June 22nd 1941. Barbarossa the largest military attack of World War Two and an example of what can go wrong when your pick on a powerfull group and make and an enemy.

    This fine is really good news but not for the obvious reasons. For several years the regulatory bully boys and girls have been hitting the small IFA and although some of this is in breach of the ECHR article 6 & 7 etc that same group is unable to respond and fight. The more the big boys get hit the better because they have the dosh and membership of the lodges and influence with the MPs. Remember it was the downfall of the Nazis when they turned on the Russians.

  5. I do not a problem with the FSA fining the likes of GS as this money will make our IFA fees less next year. The reason for this is that the fine money goes to the running cost and protection side of the stated in previous articels.

    THe more that big firms and Banks are fined the better for us IFA as we do not have the same problems.

  6. I think they should fine Directors and senior managers directly from their pay packets. Then lets see how quickly they comply !!

  7. How does a £17.5 million fine become a even bigger £20 million in the headline.

    Handed out by Elvis Presley on the moon, shock.

  8. This my second go at asking why does the headline say £20m when the fine is £17.5m,
    or shouldn’t I ask ?
    More accurate reporting please.

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