Goldman Sachs agreed to pay $425,000 as part of a settlement with the Financial Industry Regulatory Authority (FINRA) addressing allegations of reporting and supervision violations regarding more than 1 million over-the-counter (OTC) options positions.
The bank failed to report or inaccurately reported OTC options positions to the large options positions reporting (LOPR) system in violation of FINRA Rule 2360(b)(5), according to the self-regulatory organization’s disciplinary action published Wednesday. Goldman neither admitted nor denied FINRA’s findings.
The details: Between July 2018 and September 2021, Goldman’s systems for reporting OTC options positions “failed to recognize that the accounts of certain customers were under common control or acting in concert,” according to FINRA. These alleged lapses affected 1,035,000 positions.
During that time period, Goldman’s automated system was “too restrictive to be effective on its own,” FINRA said. The firm’s manual review process, designed to catch acting-in-concert accounts not flagged by the automated system, failed to properly oversee institutional investor accounts when LOPR reporting responsibilities were transferred from one department to another, per the settlement.
Goldman revised its manual and automated review processes in September 2021 after identifying the process gap, FINRA said.
Goldman declined to comment.
Compliance considerations: Goldman was previously penalized by FINRA in 2017 and 2012 regarding alleged LOPR reporting lapses.
Earlier this year, the firm was fined $3 million by FINRA for mismarking nearly 60 million short sell orders as long and related supervision failures.
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