The former head trader in residential mortgage-backed securities at Goldman Sachs has agreed to be barred from the securities industry and pay $400,000 to settle charges that he repeatedly misled customers and caused them to pay higher prices, the Securities and Exchange Commission announced Tuesday.
Edwin Chin generated extra revenue for Goldman by concealing the prices at which the firm had bought various residential mortgage-backed securities, then reselling them at higher prices to the buying customer with Goldman keeping the difference, the complaint charges.
On other occasions, Chin misled purchasers by suggesting he was actively negotiating a transaction between customers when he was merely selling the securities out of Goldman’s inventory, the SEC says.
Goldman Sachs says, “We terminated Mr. Chin in 2012 for reasons detailed in his Finra records.”
The Finra record says Chin was “discharged from the firm after allegations were made that: after discussion and agreement with his manager, employee sold certain securities. Over the next 16 days after the first sale, employee repurchased some of those securities through another party without advising the manager.”
“With no public exchange showing the price for each residential mortgage-backed securities trade as it occurs, investors purchasing these securities rely on dealers to be honest about the purchase price they paid,” says Michael J. Osnato, chief of the SEC Enforcement Division’s Complex Financial Instruments Unit. “Chin repeatedly abused his fundamental duty to serve as an honest transmitter of market information so he could increase Goldman’s trading profits and, indirectly, his own compensation.”
The SEC’s order finds that Chin’s misconduct began in 2010 and continued until he left Goldman in 2012. Without admitting or denying the findings, Chin agreed to pay $200,000 in disgorgement, $50,000 in prejudgment interest and a $150,000 penalty.
The SEC’s investigation is continuing.