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Goldman Sachs to pay $15 million for selling short violations

Andrew J. Ceresney, director, SEC’s Enforcement Division

Goldman Sachs has agreed to pay $15 million to settle charges that its securities lending practices violated federal regulations.

Broker-dealers such as Goldman Sachs are asked by customers to locate stock for short selling. Granting a “locate” means that a firm believes it could borrow the security to settle the short sale. 

Goldman Sachs violated a federal regulation by providing locates to customers when it hadn’t performed an adequate review of the securities to be located, the Securities and Exchange Commission said Thursday. Such locates were inaccurately recorded in the firm’s locate log that shows the basis on which Goldman Sachs has given out locates.

“The requirement that firms locate securities before effecting short sales is an important safeguard against illegal short selling,” said Andrew J. Ceresney, director of the SEC’s Enforcement Division. “Goldman Sachs failed to meet its obligations by allowing customers to engage in short selling without determining whether the securities could reasonably be borrowed at settlement.”

The SEC’s order also said that when SEC examiners questioned the firm’s securities lending practices during an examination in 2013, Goldman Sachs provided incomplete and unclear responses that adversely affected and prolonged the examination.

“SEC exams ensure that market participants are following the rules, so there will be consequences, including in the determination of remedies, when a registrant fails to provide complete and clear responses to examination staff,” said Andrew M. Calamari, director of the SEC’s New York Regional Office.

Without admitting or denying the SEC findings, Goldman Sachs consented to the order and agreed to pay the $15 million penalty.

Copyright 2016, Rita R. Robison, Consumer Specialist


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