Wall Street’s self-funded watchdog, the Financial Industry Regulatory Authority, fined Goldman Sachs Inc (GS.N) $3 million for mislabeling stock orders as “long” instead of “short” and transaction reporting violations.
Goldman mismarked 60 million short sell orders representing over 14 billion shares as “long” sales from October 2015 to April 2018, with eight million completed, according to FINRA.
FINRA said Goldman’s automated trading software upgrade to simplify order flow failed to incorporate a single line of code, causing mismarked trades.
FINRA reported 12,335 “long” orders completed below the best-posted price during a short-sell circuit breaker. Circuit breakers prohibit short sales.
FINRA said the auto-generated orders, less than 1% of Goldman’s core sell orders, hedged Goldman’s Synthetic Product Group’s synthetic risk exposure from client stock swap transactions.
FINRA stated Goldman’s mismarked orders skewed transaction reports, books, and records.
FINRA said Goldman failed to establish and maintain a supervisory framework for short sale rules SHO and trade reporting.
Goldman accepted FINRA’s findings.
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