On March 28, the United Kingdom Financial Conduct Authority (FSA) announced that it had fined Goldman Sachs International (Goldman Sachs or GSI) £34,344,700 for failure to provide accurate and timely reporting relating to 220.2 million transaction reports between November 2007 and March 2017.
The FSA requires that financial institutions submit to it transaction reports – i.e., data sets
that relat[e] to an individual financial market transaction which includes, but is not limited to, details of the product traded, the firm that undertook the trade, the trade counterparty, the client (where applicable) and the trade characteristics, price, quantity and venue.
The FSA’s rules on transaction reporting are based on the European Union’s Markets in Financial Instruments Directive (2004/39/EC) (MiFID) (until January 2, 2018) and MiFID II (thereafter).
According to the FSA, Goldman Sachs
failed to ensure it provided complete, accurate and timely information in relation to approximately 213.6m reportable transactions. It also erroneously reported 6.6m transactions to the FCA, which were not, in fact, reportable. Altogether, over a period of 9 and a half years, GSI made 220.2m errors in its transaction reporting, breaching FCA rules.
The FCA also found that Goldman Sachs
failed to take reasonable care to organise and control its affairs responsibly and effectively in respect of its transaction reporting. These failings related to aspects of GSI’s change management processes, its maintenance of the counterparty reference data used in its reporting and how it tested whether all the transactions it reported to the FCA were accurate and complete.
Because Goldman Sachs agreed to resolve the case with the FSA, it qualified for a 30 percent discount in the fine amount, resulting in a final amount of £34,344,700.
Note: This resolution with Goldman Sachs — the latest in a series of 14 fines that the FSA has imposed on financial firms for transaction reporting violations — is noteworthy in two respects. First, the number of transactions associated with Goldman Sachs’s reporting failures is the highest of any of the MiFID resolutions, and 62 percent higher than the next-highest total in the UBS resolution. As the FSA’s March 27 Final Notice in the case makes clear, the 220.2 million challenged transactions represented approximately 15 percent of the total of 1.5 billion transactions that Goldman Sachs submitted during the relevant reporting period. Second, the £34,344,700 fine is the highest of any of the 14 fines.
This resolution provides yet another indication that financial entities subject to MiFID reporting requirements need to see that their MiFID compliance programs are operating consistently and effectively. While the FSA credited Goldman Sachs with devoting “significant resources . . . to ensuring accurate transaction reporting and to remediating the causes of the failings,” providing full co-operation before and during the course of the FSA’s investigation, and self-identifying the majority of the errors to which the FSA’s Notice referred, those conclusions did not prevent the FSA from meting out a record fine for MiFID violations.
Dipping Through Geometries 