Goldman Sachs Group, Inc

Ronin Capital, Goldman Sachs Execution & Clearing, Penn Mott Securities, and Pearson Capital Management Receive Censures and Fines from NYSE Regulation

Published on: December 19, 2007 | by Shepherd Smith Edwards & Kantas, LLP

New York Stock Regulation Inc. announced its enforcement actions against four trading companies. The regulator says that Ronin Capital, LLC mismarked over 8,300 short orders because of inadequate supervisory procedures and supervision. The company continued to mismark short orders even after the SEC brought the violation to its attention. Ronin Capital was censured by NYSE Arca and ordered to pay $200,000.

NYSE Arca fined Goldman Sachs Execution & Clearing LP (GSEC) $105,000 for failing to adequately supervise business operators and associated persons in a way that guaranteed compliance with odd lot trading order rules.

Pearson Capital Management LLC was censured and fined $5,000 because it failed to meet market maker requirements. Penn Mott Securities was fined $3,200 for similar violations.

Citigroup, Lehman Brothers, DeutscheBank and other Firms Fined for Failing to Deliver Trade Confirmations.

Published on: October 9, 2007 | by Shepherd Smith Edwards & Kantas, LLP

NYSE Regulation fined 14 of its member firms a total of $10.4 million in fines for failing to deliver trade confirmations to their clients and other violations.

Citigroup Global Markets received the heaviest fine of $2.25 million for failing to deliver trade confirmation documents in more than a million consumer transactions. Lehman Brothers and DeutscheBank were each fined $1.25 million.

Other firms sanctioned included UBS Securities; Bear Stearns & Co.; Credit Suisse Securities (USA) LLC ; Banc of America Securities LLC; Goldman Sachs & Co.; JP Morgan Securities; Wachovia Capital Markets LLC; and Keefe, Bruyette & Woods Inc. Fines levied against these firms ranged from $375,000 to $800,000.

Ex-Goldman Sachs & Co. Employee Pleads Guilty To Operating Multi-Million Dollar Insider Trading Scheme

Published on: September 26, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Former Goldman Sachs & Co. Associate Eugene Plotnik has pled guilty to conspiracy to commit securities fraud, in addition to eight counts of insider trading. The charges carry a maximum of 165 years in prison.

Plotnik had been charged with running a “multi-faceted,” multi-million dollar scam that used inside information from at least three sources to conduct trading. The sources included a Merrill Lynch analyst, a federal grand juror, and two printing press employees that stole advance copies of a business publication with nonpublic information.

As part of his plea agreement, however, Plotnik promised that he would not appeal a lighter sentence ranging from 4 years and 9 months to 5 years and 11 months in prison. He also agreed to repay the money. More than $6.7 million acquired from the scheme is in illegal gains. Federal authorities have already frozen bank accounts to secure most of the funds.

Merrill Lynch Seizes $400 Million of Assets from a Bear Stearns Managed ‘Subprime’ Hedge Fund for Failing to Meet Margin Calls

Published on: June 21, 2007 | by Shepherd Smith Edwards & Kantas, LLP

A hedge fund managed by Bear Stearns that takes both bullish and bearish positions in subprime loans has been hit heavily by conditions in that market. Some of the fund’s assets were held at Merrill Lynch, on margin. When the equity in the fund dropped, Merrill issued margin calls.

The hedge fund reportedly began with about $600 million in investor capital, $40 million of that from Bear Stearns and its executives, then borrowed $6 billion from Wall Street lenders, including Merrill, Goldman Sachs, Bank of America and Deutsche Bank.

As the fund’s assets lost market value, the Bear Stearns managers scrambled to sell hundreds of millions of dollars in assets to satisfy demands for cash and assets from creditors to stave off liquidation of the fund. The managers auctioned almost $4 billion in mortgage bonds, and attempted to present a 30-day plan to sell more assets, but was unable to persuade Merrill to refrain from seizing assets.

Claims Against Goldman Sachs for Alleged Fannie Mae Fraud Must Be Filed Individually

Published on: May 14, 2007 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. District Court for the District of Columbia dismissed class action claims against Goldman Sachs & Co. stemming from two Real Estate Mortgage Investment Conduit–or REMIC–deals with Fannie Mae.

Judge Richard Leon said that the plaintiffs–Fannie Mae investors–-failed plead a case which involved “direct acts” of securities fraud by Goldman. (In a court system friendly to those accused of securities fraud, claims are not allowed for aiding and abetting Federal Securities violations and class action claims involving securities fraud can no longer be filed under state laws.)

However, this court’s decision does not prevent members of the former class action from now seeking their own claim against Goldman in court or arbitration. Clients of Goldman who purchased shares of Fannie Mae during this period would likely have the stronger claims. Such claims could include aiding and abetting, conspiracy and other claims under state laws which were not allowed in the class action. Fortunately, statutes of limitations on individual claims are usually preserved while a class action case is pending in court.

Goldman Sachs Affiliate Agrees To Pay $2 Million in Fines and Penalties Over Short-Sale Scheme Charges by NYSER and the SEC

Published on: March 27, 2007 | by Shepherd Smith Edwards & Kantas, LLP

NYSE Regulation Inc. and the Securities and Exchange Commission say that a clearing affiliate and prime broker of Goldman Sachs Group will pay $2 million in fines and penalties over its alleged role in an illegal short-sale trading scheme that was executed by Goldman Sachs customers through their accounts with the brokerage. Goldman Sachs Execution and Clearing, LP has not admitted to or denied any wrongdoing by agreeing to the censure. They are, however, agreeing to cease and desist from future violations.

The SEC charges that firm customers unlawfully sold securities short right before public offerings of the companies’ securities. It is accusing Goldman of violating the rules that mandate that brokers must mark sales short or long, while restricting stock loans on long sales. Both NYSER and SEC say that if Goldman had proper procedures in place, it would have discovered via its own records this illegal activity by its customers. Two Goldman customers have already settled SEC charges connected to their alleged participation in these activities.

SEC Chairman Christopher Cox told the U.S. Chamber of Commerce on the day of this announcement that the commission and its senior staff members are very concerned about abusive naked short-selling. He admitted that Regulation SHO had not properly addressed these issues and that the commission will now eliminate the regulation’s grandfather provision. Cox said that naked short-selling was connected to settlement and clearance systems and that the SEC would use technology to further deal with this issue. He said the action against Goldman was important.