Disclosure Violations Cost Goldman Sachs $15M as Settlement in Swap Business

  • Goldman Sachs Group Inc GS agreed to pay $15 million to settle U.S. Commodity Futures Trading Commission (CFTC) charges that it failed to make proper disclosures and communicate fairly to swap customers.
  • In 2015 and 2016, Goldman opportunistically solicited or agreed to enter into same-day swaps only on days and at times that were financially advantageous to Goldman and disadvantageous to its clients. 
  • Moreover, how Goldman communicated to clients caused the same-day swaps to appear more economically advantageous to the clients than they actually were.
  • According to the regulator, as part of the settlement, the bank admitted it failed to disclose essential information for nearly all "same-day" swaps executed in 2015 and 2016.
  • The order finds that Goldman failed to communicate fairly and rationally by touting the supposed benefits of same-day swap transactions but not the related costs.
  • The swap contracts were tied to an index of stocks.
  • Wall Street Journal reported that clients that traded with Goldman on those terms either bought the index at an above-market level or sold at a below-market level, which put them "underwater" at the start of the trade, the CFTC said in a settlement order. 
  • Price Action: GS shares are down 0.79% at $322.40 during the premarket session on the last check Tuesday.
  • Photo via Wikimedia Commons
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