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Goldman Sachs To Pay $1.5 Mln For Supervision Failures

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The U.S. Commodity Futures Trading Commission or CFTC announced that Goldman, Sachs & Co. (GS: Quote) would pay $1.5 million in civil monetary penalty to settle CFTC charges for failing to supervise a former trader, Matthew Marshall Taylor, in late 2007. The CFTC Order also requires Goldman to cease and desist from violating a CFTC regulation requiring diligent supervision.

Goldman failed to supervise diligently the trading activities of Taylor, whose trading activities on seven days in mid-November and mid-December 2007 in the e-mini S&P 500 futures contract.

CFTC filed an enforcement action in the Federal District Court against Taylor on November 8, charging Taylor with defrauding Goldman by intentionally concealing an $8.3 billion trading position in 2007. Goldman suffered a loss of over $118 million in unwinding Taylor's position, CFTC stated.

Goldman failed to have policies or procedures reasonably designed to detect and prevent the manual entry of fabricated futures trades into its front office systems.

CFTC Commissioner Bart Chilton said he thought Goldman's fine should have been at least $7.8 million. "I do not believe that the $1.5 million penalty is anywhere close to an amount representing a sufficient penalty or deterrent", Chilton stated. Fines should represent more than a "slap on the wrist" or a "cost of doing business", he added.

"Given the egregious nature of the failure to supervise adequately, combined with the high number of violative transactions, I believe that the monetary penalty should be significantly higher in order to represent a sufficient punishment, as well as to denote a meaningful deterrent to future illegal activity," Chilton said in a dissenting opinion.

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by RTT Staff Writer

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