Goldman Sachs Group's London unit has been fined £17.5 million (€21.3 million) for failing to notify the UK's financial regulator about a US Securities and Exchange Commission investigation.
Goldman Sachs agreed to pay $550 million (€433 million) in July to settle the SEC's fraud lawsuit over how it marketed a collateralised debt obligation. The Financial Services Authority fined the New York-based bank today for failing to report to UK regulators the US investigation that led to the suit, according to an FSA statement. The firm qualified for the agency's standard 30 per cent discount for cooperating.
"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," FSA enforcement chief Margaret Cole said in the statement.
The SEC sued Goldman Sachs and employee Fabrice Tourre in April over claims the firm misled investors in a collateralised debt obligation linked to subprime mortgages, known as the Abacus transaction. The FSA said in April it would investigate Goldman Sachs International in London after the SEC filed its lawsuit. Gordon Brown, then prime minister, called on the FSA to investigate.
Goldman Sachs created and sold the CDOs in 2007, as the US housing market faltered, without disclosing that hedge fund Paulson and Co helped pick the underlying securities and bet against the investment vehicles, the SEC said in the April 16th lawsuit. CDOs are pools of assets such as mortgage bonds packaged into new securities.
"We're pleased the matter is resolved," Goldman Sachs spokeswoman Fiona Laffan said following the FSA announcement.
The SEC spent a year obtaining documents and witness evidence about Abacus, including interviewing London-based employees, the FSA said. In September 2009, the SEC told Goldman Sachs that it was planning an enforcement action. The bank's compliance department in London only learned of the SEC investigation when it filed the lawsuit this year, the FSA said.
The fine is the second-largest levied by the FSA. JPMorgan Chase and Co received the largest FSA penalty in June when its London unit was fined £33.3 million for not properly segregating client money from the firm's accounts.
Bloomberg