Goldman Sachs fine follows history of problemed reporting

Goldman Sachs International’s transaction reporting failures for which it was fined £34.3 million this week were in some cases similar to errors made by the bank in 2006 and 2007, the City watchdog said.

The Financial Conduct Authority (FCA), which announced the fine on Thursday (28th), said there was a dialogue between the regulator and the bank about transaction reporting breaches in 2006 to 2007.

Some of the breaches were similar, but not identical, to the errors described in the official FCA Final Notice that details the failings behind this week’s fine.

At the time of the first breaches the bank was preparing for the 2007 introduction of the Markets in Financial Instruments Directive (MiFID) and had put in place systems architecture, governance requirements and controls to support compliance with MiFID transaction reporting requirements.

The firm subsequently upgraded its systems, the FCA said in the official notice.

An internal audit of the problems it had found resulted in the firm initiating a review of transaction reporting in 2009, which was later extended globally to other regulatory reporting obligations beyond MiFID.

During a subsequent project to implement changes following the review, it was realised that the project would be more complex than originally thought.

The FCA notice says: “…it became apparent to the Firm that the project was going to be more complex and take more time than was first anticipated, especially because of the complexity associated with building its enhanced controls across all of the systems through which data used for transaction reporting flowed.

“The Firm also identified a scarcity across the Firm and the industry of personnel with the expertise and systems knowledge required both to implement the enhanced controls and remediate the issues identified during the course of the project.”

The latest fine includes a 30% reduction after the firm agreed to resolve the matter.

The failings include the failure to report transactions between June 2013 and July 2015 in equity instruments admitted to trading on the London-based BATS Chi-X exchange because they were not included on the list of reportable instruments maintained by the European Securities and Markets Authority, which was used by the firm as one of its sources for determining which instruments were reportable. 

The firm under-reported approximately 8.8 million transactions in relation to this issue and the fine relates overall to the failure to provide accurate and timely reporting relating to 220.2 million transaction reports between November 2007 and March 2017. In total, the firm made 1.5 billion transaction reports during that period.

The 220.2 million figure includes 6.6 million transactions to the FCA, which were not, in fact, reportable, the watchdog said.

Mark Steward, FCA executive director of enforcement and market oversight, said: “The failings in this case demonstrate a failure over an extended period to manage and test controls that are vitally important to the integrity of our markets. These were serious and prolonged failures. We expect all firms will take this opportunity to ensure they can fully detail their activity and are regularly checking their systems so any problems are detected and remedied promptly, unlike in this case.”

Certain other UK authorised firms within the Goldman Sachs Group also undertook MiFID transaction reporting during part of the relevant period, and relied upon aspects of the firm’s transaction reporting arrangements.

©2019 funds europe

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