Goldman Sachs (NYSE:GS) is currently under a new investigation by the Fed and SEC.
(Reuters) The U.S. Federal Reserve and the Securities and Exchange Commission are investigating Goldman Sachs Group’s role in two deals with Silicon Valley Bank that preceded the latter’s collapse, the Wall Street Journal reported on Thursday citing people familiar with the matter.
Silicon Valley Bank had booked a $1.8 billion loss on the sale of a bond portfolio to Goldman.
The Wall Street giant was also an underwriter for a failed share sale by the bank that eventually led to the meltdown.
The Fed and the SEC are seeking documents related to Goldman’s role as both buyer of the securities portfolio and adviser on the capital raise, the report said.
They are looking to see if Goldman’s investment banking side and its trading division were improperly communicating about the portfolio sale, the report added.
“SVB engaged Goldman Sachs to assist with a proposed capital raise and sold the firm a portfolio of securities.
Prior to that sale, Goldman Sachs informed SVB in writing that we would not act as their advisor on the sale, and that SVB should not rely on any advice from the bank in this regard, but instead hire a third-party financial advisor,” a spokesperson for Goldman said.
An SEC spokesperson said in an emailed statement the agency “does not comment on the existence or nonexistence of a possible investigation”.
A spokesperson for the Fed declined to comment according to Reuters.
Latest Goldman Sachs Scandal
Goldman Sachs was fined $15 million in April for failing to make proper disclosures and communicate fairly to swap customers, the CFTC said.
The institution was also recently fined $3 million by the self-regulatory agency FINRA for marking short sales as ‘long’ sales in a timespan of three years.
Retail investors allege the fine is a pay to play agreement between the institutions and regulators stating that the profits made over the years substantially overwhelm the ‘slap on the wrist’ for the giant.
Now the Commodities Futures Trading Commission says Goldman Sachs “failed to communicate to clients in a fair and balanced manner based on principles of fair dealing and good faith,” in the latest scandal.
The institution is known in the industry for its manipulative and divisive strategies across various markets — all at the cost of everyday investors for self-gain.
In January, the fed launched an investigation to identify whether the business had appropriate safeguards in place as the bank ramped up lending.
Between 2015 and 2016, Goldman opportunistically sold clients on so-called “same-day” swaps at times that financially benefited the bank and hurt the customers, the CFTC said in a settled order.
As part of the settlement, the bank admitted it failed to disclose key information for nearly all “same-day” swaps executed in 2015 and 2016, according to the regulator.
Goldman “saw an opportunity” in buying or selling swaps when they were trading at a premium or discount to the projected settlement prices of certain equity indexes, the CFTC said.
Goldman Sachs Marked Short Sales as ‘Long’ for Three Years
“It allowed the firm to short millions of shares while short sale circuit breakers were in effect, over a period of 3 years (3 whole years!!)”, says Genevieve Roch-Decter.
“So Goldman breaks the rules, profits, and then FINRA issues a slap on the wrist fine of $3m, and keeps $1.1m for itself.”
From October 2015 to April 2018, Goldman mismarked around 60 million short sale orders totaling more than 14 billion shares as “long” sales, with nearly eight million of those orders, totaling more than a billion shares, being executed, FINRA said.
FINRA has been under serious heat this year since the halt and delisting of ticker symbol MMTLP.
The mismarked orders were caused by the failure to add a single line of computer code during an upgrade to automated trading software Goldman used to simplify its order flow, FINRA said.
Because they were inaccurately marked as “long,” 12,335 of the executed orders were executed at or below the best displayed price available while a short sale circuit breaker was in effect, FINRA said.
Short sale circuit breakers prohibit the execution or display of a short sale in that security at a price that is less than or equal to the current national best bid.
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