Goldman Sachs fined $513K by FINRA over faulty surveillance reports

In its decision notice published Tuesday, FINRA said the firm did not include warrants, rights, units, and certain over-the-counter (OTC) equity securities in nine automated surveillance reports from February 2009 to April 2023. Securities were excluded from the reports for two to 12-plus years, the self-regulatory organization said. Among the surveillance reports that excluded these securities were reports on wash trading and marking the open and close of trades, per the notice.

About 5,000 alerts were affected by the oversight, FINRA said. The omissions were discovered during cross-market surveillance conducted by the organization.

Compliance considerations: In addition to failing to include those securities in the surveillance reports, Goldman Sachs did not have a policy in place to review automated surveillance reports to ensure they included all relevant securities traded as part of the firm’s business, per FINRA.

In February 2021, Goldman Sachs implemented reviews to identify if any securities “had been inadvertently excluded from new or modified surveillance reports,” the notice stated.

Goldman Sachs added the securities to the relevant surveillance reports either in response to FINRA’s investigation or through the adoption of new surveillance reports. The firm fully remediated the issue by April 2023, FINRA said.

In August, Goldman Sachs agreed to pay $425,000 to settle charges levied by FINRA addressing allegations of reporting and supervision violations regarding OTC options positions. The firm was also previously penalized by FINRA in 2017 and 2012 for similar alleged reporting lapses.

In April, the firm was fined $3 million by FINRA for mismarking nearly 60 million short sell orders as long and related supervision failures.

A spokesperson for Goldman Sachs declined to comment.