Goldman Sachs Slapped with $5.5 Million Fine by CFTC for Recordkeeping Failures

Commodity Futures Trading Commission (CFTC) has imposed a $5.5 million civil monetary penalty on Goldman Sachs & Co. in response to recordkeeping violations and failure to adhere to prior cease-and-desist orders.

The Commodity Futures Trading Commission (CFTC) has taken punitive action against financial giant Goldman Sachs & Co., imposing a substantial $5.5 million civil monetary penalty as a consequence of recordkeeping failures and non-compliance with previously issued cease-and-desist orders. The CFTC's move underscores the importance of strict regulatory adherence in the financial industry, sending a clear signal that violations will result in significant financial repercussions.

The CFTC's order stems from a prior enforcement action dating back to November 2019, when Goldman Sachs was initially found to have breached its recording obligations. During that instance, the company failed to record the phone lines of a trading and sales desk for a period of 20 calendar days in January and February 2014 due to technical malfunctions. Subsequently, Goldman was required to pay a $1 million civil monetary penalty and was compelled to cease and desist from further infractions of CFTC's recordkeeping provisions.

However, the recent order reveals that Goldman Sachs did not adequately address its recording failures following the 2019 enforcement action. The CFTC's investigation uncovered additional instances of recordkeeping lapses, pointing to non-compliance with the earlier cease-and-desist order. Specifically, Goldman employed the services of a vendor to record calls made on mobile devices. Amid the increased use of this vendor's recording service during the pandemic, hardware failures surged, leading to the incomplete recording and retention of thousands of mobile device calls. The bank was alerted to this issue when employees reported poor call quality, precipitating an interim solution in May 2020 and a complete hardware replacement in September 2020.

Furthermore, Goldman Sachs introduced software from another vendor in March 2020 to replicate the functionality of a trading turret via computer systems. However, a software glitch discovered in May 2020 resulted in improper audio recording, leading to the failure to adequately record and retain a significant number of calls. Although an interim resolution was implemented, a permanent fix was only established in June 2022 through a software update.

The CFTC's enforcement action underscores the regulatory body's commitment to ensuring compliance with recordkeeping provisions, particularly in the context of financial trading. The order acknowledges Goldman's cooperation with the CFTC's investigation while emphasizing the need for stringent adherence to prior cease-and-desist orders.

Ian McGinley, Director of Enforcement at the CFTC, stated, "As this case demonstrates, the CFTC will continuously pursue swap dealers that fail to meet their recording obligations and there will be consequences for violating CFTC orders, including increased penalties." The CFTC's decision to levy a substantial $5.5 million penalty highlights its resolve to hold financial institutions accountable for lapses in regulatory compliance and underscores the industry's obligation to maintain the highest standards of recordkeeping and transparency.