The Securities and Exchange Commission (SEC) announced a related settlement with Goldman. Pursuant to the settlements, Goldman will pay US$11 million each to FINRA and the SEC.
Brad Bennett, FINRA executive vice president and chief of enforcement, said, "Goldman’s trading huddles created an environment of heightened risk in which material non-public information concerning analysts’ published research could be disclosed to its clients.
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"In addition, the firm did not have an adequate system in place to monitor client trading in advance of changes in its published research," he added.
In 2006, Goldman established a business process known as "trading huddles" to allow research analysts to meet on a weekly basis to share trading ideas with the firm’s traders, who interfaced with clients, and, on occasion, equity salespersons. Analysts would also discuss specific securities during trading huddles while they were considering changing the published research rating or the conviction list status of the security.
FINRA said that trading huddles created the significant risk that analysts would disclose material non-public information, including, among other things, previews of ratings changes or changes to conviction list status. Despite this risk, Goldman did not have adequate controls in place to monitor communications in trading huddles and by analysts after the huddles.
Goldman did not adequately review discussions in the trading huddles to determine whether an equity research analyst may have previewed an upcoming ratings change, the regulator added.
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By GlobalDataIn concluding this settlement, Goldman neither admitted nor denied the charges, but consented to the entry of the SEC’s and FINRA’s findings and admitted to certain facts that were part of a prior settlement with the state of Massachusetts.
