Thursday, 28 March 2019

Goldman Sachs Handed Record Fine by the FCA

In the first of a series of shorter posts today, we will react to the news that Goldman Sachs has been handed a financial penalty by the FCA for misrepresenting a vast number of transactions over the past decade.

In the largest fine of its kind ever given out by the regulator, the FCA has fined Goldman’s London Unit £34.4 million for ‘failing to provide accurate and timely reporting relating to 220.2 million transaction reports between November 2007 and March 2017’. Because Goldman agreed to resolve a proportion of the issue – issues relating to the firm’s change management processes and its maintenance of counterparty reference data – the figure of £43.4 million is actually a reduction on what should have been a £49 million fine. The firm is guilty of not complying with the rules of the Markets in Financial Instruments Directive, or MiFID, and is the second such action taken against a bank by the FCA in less than a month after UBS was fined £28 million for the same thing. In total, the regulator has now taken action against 13 organisations for this breach, including Merrill Lynch, Deutsche Bank, Société Générale, and Barclays amongst others.

The regulator is rightfully cracking down on these breaches because the data it would obtain from efficient record keeping is used to identify market abuses and financial crime. Such a widespread and historic flouting of these regulations fundamentally affects the capability of the regulator to efficiently monitor the marketplace, which is why the FCA were clear in their press release that ‘these were very serious and prolonged failures… accurate and complete transaction reporting helps underwrite market integrity and supervise firms and markets’. There is a focus on financial crime across the globe (perhaps in name mostly, but there is a focus) and this news must be attached to the continuing developments in Malaysia where Goldman is being sued over its role in the 1MDB scandal. However, perhaps it is too much of a reach to combine these issues and suggest that the banks do not take tackling financial crime seriously enough. Maybe. Yet, one angle that must be rejected is the notion put forward by Goldman that ‘we are pleased to have resolved this legacy matter’ – this is not a legacy matter. Furthermore, it would be preferable to remove this term and concept from the wider conversation because it is particularly unhelpful. Failings from 2007 to 2017 do not constitute legacy issues, and the composition of these large organisations and, crucially, their behaviour, show that very little has changed. The protection afforded by attempting to designate something as being part of the past ought to be removed if real and affectual change is to take place in the culture of financial services across the globe.


Keywords – Goldman Sachs, FCA, Compliance, MiFID, Europe, Financial Regulation, @finregmatters

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