Goldman, Sachs & Co. has agreed to pay $15 million to settle charges that its securities lending practices violated federal regulations, the Securities and Exchange Commission announced Friday.
Goldman Sachs also did not answer SEC examiners’ questions fully when the SEC was investigating the securities lending procedures, the SEC says. The firm has agreed to pay the settlement without admitting or denying guilt.
Broker-dealers such as Goldman Sachs are regularly asked by customers to locate stock for short selling, explains the SEC. Agreeing to locate the stocks means the firm has borrowed, arranged to borrow or reasonably believes it can borrow the security to settle the short sale request.
However, Goldman Sachs agreed to the transactions without determining if the stocks were available, which is a violation of federal regulations. It also provided incomplete and unclear responses that adversely affected and unnecessarily prolonged the examination, the SEC says.
“The requirement that firms locate securities before effecting short sales is an important safeguard against illegal short selling,” says Andrew J. Ceresney, director of the SEC’s Enforcement Division.