The Financial Industry Regulatory Authority has fined Goldman Sachs & Co. $1.25 million and censured the financial services company for failing to fingerprint more than 1,000 non-registered associated individuals.
Section 17(f)(2) of the Securities Exchange Act of 1934 says members of national securities exchanges, broker-dealers, registered clearing agencies and other types of firm must fingerprint partners, directors, officers and employees, unless they are exempt, to make sure they aren’t disqualified.
“Under Section 3(a)(39) of the Exchange Act, a person is subject to disqualification if that person is subject to an order of a regulatory agency barring that person's association with a broker or dealer, or if that person has been convicted of a felony within the prior 10 years,” Finra said in its disciplinary letter.
According to Finra, Goldman either failed to fingerprint 5,150 non-registered associated persons in a timely manner between January 2015 and January 2018 or otherwise lacked records to demonstrate it had fingerprinted them.
“At least 1,061 of the 5,150 individuals were not fingerprinted prior to employment,” said Finra’s letter. “These 1,061 primarily consisted of individuals who transferred to Goldman's United States offices from a foreign affiliated entity, or who transferred to Goldman from another firm.” Goldman couldn’t determine whether the remaining 4,089 individuals were fingerprinted before they were employed at the firm because the firm didn’t keep records for it, Finra claimed, adding that Goldman also didn’t keep the records for 466 non-registered people it did fingerprint.
Two people were allowed to associate with the firm between April 2018 and November 2019 even though they turned out to be disqualified. Goldman belatedly submitted one person’s fingerprints in August 2019 after obtaining them the previous May, then “was notified by Finra in that month that the individual was the subject of a 2012 felony conviction.”
Finra also said that Goldman failed to create a supervisory system to achieve compliance with the agency’s rules, saying the firm didn’t have a process in place to identify non-registered associated persons.