Goldman Sachs, a leading investment banking company, has reached a settlement with the Securities and Exchange Commission (SEC) to pay $6 million. This payment is in response to charges that the company submitted thousands of incomplete or inaccurate batches of trade data to the SEC over a 10-year period ending in October 2022.
The SEC recognized Goldman Sachs' efforts to improve its processes for submitting trading data using electronic blue sheets (EBS). These EBS submissions provide crucial information about trading data from brokers, clearing firms, and market makers, allowing the SEC to effectively oversee the market and protect investors from potential wrongdoing.
The settlement order outlined the compliance failures of Goldman Sachs, leading the company to acknowledge these failures and accept a censure in addition to the financial penalty. A spokesperson for Goldman Sachs expressed their satisfaction with the resolution but declined to provide further details.
Thomas P. Smith Jr., associate regional director in the SEC's New York regional office, emphasized the importance of accurate blue sheet data. He stated that such data is vital for the commission's enforcement and regulatory functions, as it allows them to maintain market integrity and protect investors' interests.
Between November 2012 and October 2022, Goldman Sachs submitted over 52,000 EBS filings in response to the SEC's requests. However, more than 22,000 of these filings contained inaccurate information or omissions, causing faulty trade data across at least 163 million transactions, according to the SEC.
Data Failures and Remediation Efforts: Goldman Sachs Faces SEC Settlement
Goldman Sachs has recently reached a settlement with the U.S. Securities and Exchange Commission (SEC) regarding data failures and inaccurate submissions of Electronic Blue Sheets (EBS). The errors ranged from missing trade reports to incomplete trading details, including execution time, ticker symbols, prices, and exchange codes. In some instances, Goldman submitted bulk trade data instead of individual transactions, which goes against SEC regulations.
The SEC attributed these mistakes to a "logic error" or system glitch within Goldman's reporting system. As a result, around 86,000 long sales were mistakenly reported as short sales. The lack of internal testing controls led to countless erroneous EBS submissions by the firm.
According to the SEC, broker-dealers like Goldman have a fundamental obligation to provide accurate and complete EBS data upon request by the commission. This settlement is not Goldman's first encounter with EBS submission issues. The SEC mentions three prior instances when the firm faced disciplinary actions connected to trading data, including incidents involving the New York Stock Exchange in 2006 and the broker-industry self-regulatory organization Finra in 2010 and 2014.
Although the SEC acknowledged that Goldman voluntarily took steps to rectify the situation, including collaborating with commission representatives during the investigation, it emphasized the importance of accurate EBS data. The firm initiated an extensive analysis and overhaul of its EBS program in April 2018, even before being alerted by the SEC about the reporting errors. This ongoing effort has resulted in significant improvements in supervisory controls, such as enhanced periodic monitoring of EBS reports, better management of exceptions, and regulatory reporting controls. Additionally, Goldman has allocated additional resources to ensure EBS compliance.
In conclusion, Goldman Sachs' recent settlement with the SEC highlights the importance of accurate and complete EBS data. The firm's data failures and subsequent remediation efforts underscore the need for robust internal controls and testing procedures. As market participants become increasingly reliant on electronic data reporting, it is crucial for broker-dealers to prioritize the accuracy and integrity of their submissions.
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