UK watchdog fines Goldman Sachs $27 million
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Traders work in the Goldman Sachs stall on the floor of the New York Stock Exchange July 16, 2010.
Credit: Reuters/Brendan McDermid
NEW YORK/LONDON |
NEW YORK/LONDON (Reuters) - Britain's financial watchdog fined Goldman Sachs Group Inc 17.5 million pounds ($27 million) for failing to tell the regulator that it was the subject of a U.S. probe, reviving disclosure headaches for the Wall Street powerhouse.
The fine -- one of the biggest ever imposed in Britain -- stemmed from Goldman's troubled Abacus mortgage-security product, which was the focus of an investigation by the U.S. Securities and Exchange Commission.
But it was not the Abacus product itself that put Goldman at odds with Britain's Financial Services Authority. Instead, it was the firm's failure to inform the FSA that it was facing an SEC probe.
"Goldman Sachs International 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 authorized firm," FSA director Margaret Cole said in a statement on Thursday.
In a terse response to the FSA fine, a Goldman Sachs spokeswoman said, "We're pleased the matter is resolved."
In July, Goldman agreed to pay $550 million to settle civil fraud charges over how it marketed the Abacus subprime mortgage product, ending months of negotiations with the SEC that rattled the bank's clients and investors.
Goldman had known for several months that charges from the SEC were possible, but it did not report it to shareholders, regulators or clients. Its shares fell 12 percent on April 16, the day the SEC sued. That was seven months after the bank received a Wells Notice alerting it to potential charges.
DISCLOSURE CONCERNS
The lack of disclosure has prompted lawsuits and investigations -- and even caused the bank to lose business.
Jacob Zamansky, an attorney who is representing shareholders in a class-action lawsuit against Goldman, said such suits will be bolstered by the FSA fine.
"This is not going away," said Zamansky. "I believe these regulatory actions strengthen the case of shareholders against Goldman."
On June 16, the largest U.S. public pension fund, Calpers, notified Goldman that it would not use the firm in its pool of real estate investment consultants, according to a document obtained by Reuters. Calpers's decision came after fund officials said they planned to question Goldman about its failure to disclose, when it bidding for a Calpers contract, that it was facing an investigation from the SEC.
The U.S. Financial Industry Regulatory Authority also was investigating Goldman's failure to report the Wells Notice that it received in September regarding trader Fabrice Tourre.
Tourre, a French banker, was involved in marketing the Abacus product. Tourre, who had dubbed himself "Fabulous Fab," denied allegations that he or the bank misled investors over the high-risk Abacus product.
Tourre marketed the Abacus product back in 2007 -- toward the height of a bull market run and just before the onset of the credit crisis that rattled markets and caused a huge slump in the value of many mortgage-related debt products.
The FSA said Goldman failed to notify it of the fact that the SEC had issued Wells Notices to the bank and to Tourre.
Goldman Sachs shares were up 1.8 percent to $150.20 in morning trade on the New York Stock Exchange.
(Reporting by Sudip Kar-Gupta in London and Steve Eder in New York; Editing by Mike Nesbit)
($1=.6463 pounds) (Reporting by Steve Eder)
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Ms. Cole’s optimism is unjustified. 27 million dollars in fines pales in comparison to the hundreds of billions of dollars they took in the years prior to the bubble’s mighty pop.
We have reinforced the idea that large banks can do pretty much whatever they like with relative impunity.
A lot of people should have gone to jail for a long time over this.
In fact, one considers all the harm done in America and throughout the world, it might be prudent to associate financial crimes like this with capital punishment.
This will nicely compensate the FSA the extra £20m they sought in government/taxpayer funding.
It is a sign of the times that every UK Quango with the potential of levying fines is out there procuring ever bigger fines to protect there own parasitic jobs.
How many previously unheard of US regulators will come out of the cupboard seeking some fines revenue from bp at the expense of bp’s owners, US and UK pensions funds? Hopefully not as many as the 220,000 US Gulf Coast citizens who have recently applied for fishing licences so that they can apply for loss of income compensation from bp.
Goldman might move the world delivering capital to where it is best spent, the UK financial services industry might deliver 35% of all UK tax revenues, banks may be in a bind from sovereign, corporate and personal debt default but who cares. We can do this and we will do this. If the SEC can take $500m from Goldman then we can take £20m for a faulty paper chase.
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