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Goldman Sachs Fined $650,000 for Mortgage Securities Disclosure Violation

Nov 09, 2010

The Financial Industry Regulatory Authority (FINRA) announced that it has fined Goldman Sachs & Company a total of $650,000 for failing to disclose that two of its registered representatives, including Fabrice Tourre, a Goldman vice president, had received formal notices from the Securities and Exchange Commission (SEC) that they were the subjects of investigations. Tourre's "Wells Notice" was issued in connection with the SEC's investigation of an offering of a synthetic collateralized debt obligation (CDO) called ABACUS 2007-ACI (Abacus). Firms are required to update a representative's regulatory record by filing a Form U4 reporting the receipt of a Wells Notice within 30 days of learning of the Notice. In Tourre's case, his Form U4 was not amended until May 3, 2010, more than seven months after Goldman learned of his Wells Notice, and only after the SEC filed a complaint against Goldman and Tourre on April 16, 2010. FINRA found that Goldman did not have adequate supervisory procedures and systems in place to ensure that required disclosures were made when registered employees received notice that they were the subject of a regulatory investigation. FINRA also found that Goldman's written supervisory procedures, manuals and policies were inadequate. Nowhere did the procedures and policies mention "Wells Notices" specifically and the need to make disclosure when one was issued. "Goldman's failures impacted the ability of FINRA and other securities regulators to discharge their registration, examination and oversight duties, and limited the ability of investors and other market participants to adequately assess the individuals through FINRA's public disclosure program, BrokerCheck," said James S. Shorris, FINRA executive vice president and acting chief of enforcement. Individuals at Goldman were promptly informed of the receipt of the Wells Notices by the outside counsel for both employees, but they subsequently failed to notify the Goldman compliance unit charged with updating Forms U4. The second registered individual subsequently was not named in an SEC complaint. As part of the settlement, Goldman also agreed to review its supervisory procedures and systems in the reporting area and to implement and document any necessary remedial measures. In concluding this settlement, Goldman neither admitted nor denied the charges, but consented to the entry of FINRA's findings. For more information, visit www.finra.org.
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Nov 09, 2010
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