Legal hassles heightened for
The Goldman Sachs Group, Inc.
), as the bank was slapped with a fine of $800,000 by the Financial
Industry Regulatory Authority (FINRA). The company has been charged
of malpractices related to its dark pool - SIGMA-X amid ongoing
scrutiny around the US share trading industry.
It is alleged that Goldman defaulted in maintaining the policies
and procedures to guarantee that clients trading in the SIGMA-X
dark pool were provided the best possible prices. FINRA accused
Goldman for violation of "trade-through" rule under which trades
are executed at the best possible prices.
Specifically, FINRA notified that during the trading period from
Jul 29, 2011 to Aug 9, 2011, more than 395,000 deals were struck in
SIGMA-X, sullying the "trade-through" rule. Though Goldman was
unaware of the violation, timely detection could have saved the
litigation costs. Notably, on determination of the pricing errors,
Goldman already compensated customers by paying around $1.67
million in March.
According to FINRA, from Nov 2008 through Aug 2011, the bank also
failed to preserve the written policies to prevent trade-throughs
along with improper invigilation. However, the bank neither
admitted nor denied any wrongdoings.
Among other holders of the dark pool, last week, a lawsuit has been
) by the New York Attorney General Eric Schneiderman, charging it
for faulty practices related to its dark pool. It is alleged that
Barclays made false claims regarding its Equities Electronic
Trading Division taking measures to protect investors from
high-frequency traders in the dark pool. In fact, the division
fraudulently propagated the trading platform by understating the
degree of high-frequency traders in it.
Credit Suisse Group AG
), Barclays has the highest holdings of dark pool in the country
). In a determined effort to develop its dark pool as one of the
largest in the U.S., Barclays compromised on investors' security
and divulged sensitive information about their identity and trading
activities to the high-frequency traders.
Though Goldman has undertaken special measures to combat the rise
in expenses, persistent litigation issues will be a headwind for
the company in the forthcoming quarters. Moreover, the overall
subdued economic scenario and stringent regulatory environment will
continue to pressure the top line.
Goldman currently carries a Zacks Rank #4 (Sell).
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