CFTC fines Goldman $1.5 million for failed supervision
The U.S. Commodity Futures Trading Commission (CFTC) ordered Goldman to pay a $1.5 million civil monetary penalty to settle CFTC charges that it failed to diligently supervise its employees for several months in late 2007. The CFTC Order also requires Goldman to cease and desist from violating a CFTC regulation requiring diligent supervision.
According to the CFTC's Order, for several months, Goldman failed to ensure that certain aspects of its risk management, compliance, and supervision programs are in place. During November and December 2007, Goldman further failed to supervise diligently the trading activities of the former Goldman trader, Matthew Marshall Taylor.
According to ,CFTC Goldman failed to have policies or procedures designed to prevent the manual entry of fabricated futures trades into its front office systems. As a result, on seven trading days in November and December 2007, Taylor circumvented company's supervision systems by entering fabricated e-mini S&P 500 sell trades into its manual trading system, which camouflaged e-mini S&P 500 buy trades Taylor had executed in the market. Taylor established an $8.3 billion e-mini S&P 500 position in a Goldman trading account on December 13, 2007. Goldman suffered a loss of over $118 million in unwinding Taylor's position.
After Taylor was discharged, Goldman orally notified the CME and the Financial Industry Regulatory Authority (FINRA). Goldman's ensuing regulatory filings with the National Futures Association (NFA) and FINRA stated that Taylor had been accused of "violating investment-related statutes, regulations, rules, or industry standards of conduct" for "conduct related to inappropriately large proprietary futures positions in a firm trading account."
In response to FINRA's follow-up inquiries, Goldman provided additional important information only to FINRA. Goldman never provided that additional important information to the NFA or the Commission until after the CFTC's Division of Enforcement commenced the investigation leading to this's settlement. ■