Goldman Sachs Faces $5.5M CFTC Fine for Recordkeeping

In a significant turn of events, Goldman Sachs again finds itself at the center of financial scrutiny.

The renowned investment bank will pay a hefty fine of $5.5 million, as declared by the Commodity Futures Trading Commission (CFTC).

The bank’s failure to maintain proper records of staff mobile phone calls has resulted in this penalty. It also breached a 2019 order issued by the CFTC.

The Troubling Past

We must delve into the past to fully comprehend the gravity of this recent development. 2019, the CFTC issued an order against Goldman Sachs, highlighting their failure to record trading and sales desk phone calls for 20 calendar days in 2014.

This lapse was attributed to a hardware malfunction. Consequently, Goldman Sachs was directed to pay a substantial sum of $1 million and a strict directive to cease any further recordkeeping violations.

The Continuing Lapses

However, the situation took an even more concerning turn following the 2019 order. In blatant disregard of the cease-and-desist provision, Goldman Sachs continued to grapple with recordkeeping failures.

Just four months after the original order, the emergence of the COVID-19 pandemic led to an increased utilization of a vendor’s recording service.

Sadly, this surge in usage exacerbated the problems with the vendor’s hardware, resulting in thousands of additional failures to record and retain calls.

This issue persisted until May 2020, when it was finally uncovered, and a temporary solution was implemented. Subsequently, a new and improved system was implemented in September of the same year.

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A Chain of Mishaps

The string of mishaps did not end there. In March 2020, Goldman Sachs adopted trading software that, as fate would have it, was later discovered to have recording deficiencies.

The consequence? Once again, thousands of phone calls went unrecorded. It wasn’t until June 2022 that a software update was successfully implemented to rectify this issue.

CFTC’s Stance

Ian McGinley, the director of enforcement at the CFTC, commented on this matter. He stated, “As this case demonstrates, the CFTC will continuously pursue swap dealers that fail to meet their recording obligations.” He also emphasized that there will be consequences for violating CFTC orders, including increased penalties.

We are committed to holding swap dealers accountable when they fail to comply with their regulatory obligations and abide by obligations imposed by prior CFTC orders.”

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Goldman’s Response

In response to these developments, a spokesperson for Goldman Sachs expressed, “Goldman is pleased to have this matter resolved.” This statement suggests that the bank is eager to put this issue behind them and focus on moving forward.

A Broader Perspective

This incident sheds light on the pressing issue of recordkeeping within the financial industry. It is not an isolated case.

Recently, regulatory bodies have imposed fines on 11 other firms, including Wells Fargo, BNP Paribas, and Societe Generale. These fines were imposed due to allegations that these institutions used unapproved electronic messaging channels, such as WhatsApp, for business communications.

These actions form part of a two-year-long endeavor by regulators to clamp down on the use of “off-channel” communication apps by major banks.

In conclusion, Goldman Sachs’ $5.5 million penalty is a stark reminder of maintaining proper records and adhering to regulatory orders. It is a cautionary tale for financial institutions worldwide, emphasizing the need for stringent recordkeeping practices in an increasingly digital age.