Goldman Sachs & Co. has agreed to pay a $15m civil monetary penalty to settle charges claiming that the bank has failed to make proper disclosures and communicate fairly to swap customers.
The US Commodity Futures Trading Commission (CFTC) filed the charges and imposed a penalty on Goldman for violation of its Business Conduct Standards related to swapping dealers.
According to the commission, Goldman failed to disclose several pre-trade-mid-market marks (PTMMM) and failed to communicate to clients in a fair and balanced manner.
During 2015 and 2016, the company opportunistically sold same-day swaps to clients that financially benefited the bank and affected the customers.
Goldman admitted that it failed to disclose any PTMMM or to disclose an accurate PTMMM, for almost all the same-day swaps executed, which violates the CFTC regulations.
Enforcement Director Ian McGinley said: “The purpose of the CFTC’s Business Conduct Standards is to promote transparency and fairness in the swaps market.
“The CFTC is committed to ensuring that swap dealers abide by these standards, so that swap counterparties receive disclosures allowing them to assess material aspects of the swaps before entering into them.
“As today’s penalty against Goldman demonstrates, the CFTC will aggressively pursue swap dealers that violate these business conduct standards.”
In 2015 and 2016, Goldman carried out dozens of same-day equity index swaps with US-based clients, where the equity leg of the swap strikes on the same day as the other terms.
According to the CFTC order, the company failed to disclose the PTMMM of the swaps to clients, often hiding the value of the same-day swap.
It has opportunistically solicited or agreed to same-day swaps only at times that were financially advantageous to the company and disadvantageous to its clients.
In addition, Goldman communicated with its clients in such a way that the same-day swaps appear to be more advantageous to the clients than they were.
The bank did not communicate in a fair and balanced manner and touted the benefits of same-day swap transactions, hiding the corresponding costs, said the order.
