The Financial Industry Regulatory Authority (FINRA) issued a Letter of Acceptance, Waiver, and Consent (AWC), censuring and fining Goldman Sachs & Company $1,250,000.
Why did FINRA issue the AWC?
Because of Goldman Sachs’ (Goldman’s) systems and procedures failures. FINRA found Goldman’s systems and procedures failed to identify, fingerprint, and screen associated non-registered members effectively. As a result, FINRA censured, issued a $1,250,000 fine, and required the firm to review its systems and procedures with an eye to improved compliance.
According to FINRA, Goldman either failed to timely fingerprint or lacked records to demonstrate it had fingerprinted a significant number of its non-registered members, many of whom also were not fingerprinted prior to employment. Many were individuals who transferred to the firm’s United States offices from a foreign-affiliated entity or transferred to Goldman from another firm. At issue was the firm’s inability to determine whether the remaining individuals were fingerprinted before joining the firm because it did not retain documenting records.
Documenting and recordkeeping after the fact
As part of Goldman’s remedial efforts, the firm began fingerprinting those it had missed previously. However, it was unable to do so for most of those omitted because they had left the organization. This meant that Goldman could not determine whether those individuals were subject to statutory disqualification.
FINRA’s findings also stated that the firm subsequently permitted two non-registered members subject to statutory disqualification to become and remain associated with the firm. FINRA had previously barred one prior to her joining Goldman. In this instance, FINRA noted that the firm had information about the adviser’s disqualification and belatedly submitted her fingerprints to FINRA for processing. Hearing from FINRA that she was subject to statutory disqualification, Goldman terminated her. When informed by FINRA after belatedly submitting his fingerprints that a second person was the subject of a felony conviction, Goldman also terminated his employment.
FINRA found that Goldman failed to create or maintain required fingerprint records for a number of its non-registered members and failed to establish and maintain a reasonable supervisory system and written procedures. Goldman did not have a process to identify non-registered persons who transferred from foreign affiliated entities or other acquired firms so that these individuals could be fingerprinted and screened for statutory disqualification. Moreover, it did not assign responsibility for ensuring that those individuals’ fingerprints were timely obtained to anyone.
How many people were missed?
Many. Goldman either failed to timely fingerprint or lacked records to demonstrate it had fingerprinted 5,150 of its non-registered associated persons between January 2015 and January 2018. At least 1,061 of the 5,150 individuals were not fingerprinted prior to employment. These 1,061 primarily consisted of individuals who transferred to Goldman’s United States offices from a foreign-affiliated entity or transferred to
Goldman from another firm. Goldman could not determine whether the remaining 4,089 individuals were fingerprinted before joining the firm because it did not retain records.
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