Goldman Sachs handed $15m fine for lending violations

Goldman Sachs has agreed to pay a $15 million fine following charges that its securities lending practices breached federal regulations.

Under the Securities and Exchange Commission (SEC) framework, broker-dealers such as Goldman Sachs are asked by customers to locate stock for short selling. This policy represents that a firm has borrowed or reasonably believes it could borrow to settle the short sale.

The SEC found that Goldman Sachs violated regulations by improperly providing ‘locates’ to customers having not performed a sufficient review of the securities being located.

Without admitting or denying the charges, the investment-banking firm was found to be in violation of Rule 203 (b)(1) of Regulation SHO and Section 17(a) of the Securities Exchange Act.

The fine dates back to 2013 when an investigation into the firm’s securities lending practices revealed that Goldman Sachs had supplied incomplete and unclear responses.

“The requirement that firms locate securities before effecting short sales is an important safeguard against illegal short selling,” said Andrew J. Ceresney, director of the SEC’s enforcement division.

“Goldman Sachs failed to meet its obligations by allowing customers to engage in short selling without determining whether the securities could reasonably be borrowed at settlement.”