Goldman Sachs and Citigroup Global Markets have been fined $5.5m and $2.9m respectively for substantial recordkeeping failures.
The penalties were imposed by US regulatory bodies: The Commodity Futures Trading Commission for Goldman Sachs, and the US Securities and Exchange Commission for Citigroup Global Markets.
Goldman Sachs was found to have violated the cease-and-desist provision of a prior order, further committing recordkeeping violations by failing to adequately record and retain certain audio files. The prior order, dating back to November 2019, revealed that Goldman Sachs had failed to record phone lines on a trading and sales desk for 20 days in January and February 2014. The lapse occurred due to a hardware malfunction following a software update.
On the other hand, Citigroup Global Markets settled with the SEC for “wilfully violating recordkeeping requirements” related to expenses incurred in its underwriting business. The SEC stated that federal securities laws mandate broker-dealers to maintain current books and records, including ledgers or other records reflecting all assets and liabilities. From 2009 to May 2019, Citigroup used an “unsubstantiated and unverified method to calculate and record indirect expenses” related to its underwriting role.
Deputy director of the SEC’s Division of Enforcement, Sanjay Wadhwa, remarked: “Underwriters serve a critical role as gatekeepers in securities offerings. Recordkeeping failures such as these, perpetuated over at least a decade, can undermine the viability of those functions. The SEC will continue to vigorously enforce the books and records provisions of the federal securities laws, which are crucial to well-functioning markets.”
This episode comes in the wake of the SEC’s decision in early August 2023 to impose fines totalling $298m on 10 broker-dealers for similar recordkeeping lapses, related to their electronic communications and failure to preserve business messages on personal devices. These firms have already begun implementing changes to improve their compliance procedures.
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