The U.S. Commodity Futures Trading Commission (CFTC) has issued a settlement order against Goldman Sachs after finding that the firm violated a prior cease and desist order and failed to properly record and retain certain required audio files, thereby violating recordkeeping requirements. The order requires Goldman Sachs to pay a civil penalty of $5.5 million and to cease further violations of the Commodity Exchange Act.
In November 2019, the CFTC issued a cease and desist order, stating that Goldman Sachs had failed to record telephone conversations of trading and sales desks for 20 calendar days in January to February 2014 due to a malfunction of its recording hardware after a software patch. In response, the CFTC ordered Goldman Sachs to pay a civil penalty of $1 million and to cease further violations of the CFTC's recordkeeping requirements.
The CFTC's latest investigation found additional instances of recordkeeping failures by Goldman Sachs. Specifically, Goldman Sachs used vendor services to record calls on mobile devices. Starting in March 2020, the increased usage of the vendor's services due to the pandemic led to hardware failures, resulting in the failure to fully record and retain thousands of calls on mobile devices. Additionally, another vendor's software used by the company starting in March 2020 experienced issues, causing the system to occasionally fail to record calls, leading to the incomplete recording and retention of thousands of phone calls. Goldman Sachs implemented temporary fixes for these issues and completed a permanent software update in June 2022.
The CFTC acknowledged Goldman Sachs's cooperation in the investigation and recognized the company's statements regarding its remedial actions.
Ian McGinley, Director of Enforcement at the CFTC, stated, "As this case demonstrates, the CFTC will continue to pursue derivatives dealers who fail to fulfill their recordkeeping obligations, and violators of CFTC orders will face serious consequences. When derivatives dealers fail to comply with regulatory obligations and the obligations imposed by previous CFTC orders, we will hold them accountable."
This is not the first fine Goldman Sachs has faced this year. As early as April of this year, the company was fined $15 million by the CFTC for violating the Business Conduct Standards applicable to swap dealers. Additionally, the European Central Bank imposed a fine of €6.63 million (approximately $7.3 million) on Goldman Sachs' European subsidiary for misreporting its balance sheet.
