The Financial Industry Regulatory Authority announced Tuesday it fined Goldman, Sachs Co. $650,000 for failing to disclose that two of its registered representatives had received formal notices from the Securities and Exchange Commission (SEC) that they were the subjects of investigations.
FINRA said that one of the reps, Fabrice Tourre, was issues a Wells Notice in connection with the SEC's investigation of an offering of a synthetic collateralized debt obligation called ABACUS 2007-ACI.
Companies are required to update a representative's regulatory record by filing a Form U4 within 30 days of receiving a Wells Notice. FINRA said Tourre's Form U4 was not amended until May 3, 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.
FINRA found 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 because the company did not specifically mention "Wells Notices" 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," James S. Shorris, FINRA executive vice president and acting chief of enforcement, said in a press release Tuesday.
Individuals at Goldman were informed of the Wells Notices by outside counsel, but FINRA said “they subsequently failed to notify the Goldman compliance unit charged with updating Forms U4.”
The other rep was not named in an SEC complaint.
As part of the settlement, Goldman, which did not admit or deny the charges, also agreed to review its supervisory procedures and systems in the reporting area.
"We are pleased to have put this matter behind us,'' said Michael DuVally, vice president of media relations at Goldman Sachs.
Tom Steinert-Threlkeld contributed to this story