By Nathalie Tadena
The U.S. Commodity Futures Trading Commission has ordered
Goldman Sachs Group Inc. (GS) to pay $1.5 million to settle charges
that the firm failed to diligently supervise its employees in late
2007.
According to the CFTC's order, Goldman failed to supervise the
trading activities of Matthew Marshall Taylor, a former Goldman
trader whose trading activities on seven days in mid-November and
mid-December 2007 in the e-mini Standard & Poor's 500 futures
contract traded on the Chicago Mercantile Exchange resulted in a
loss of more than $118 million for Goldman.
The regulator said Goldman failed to have policies or procedures
designed to detect and prevent the manual entry of fabricated
futures trades into its front-office systems. Mr. Taylor in 2007
circumvented Goldman's risk management, compliance, and supervision
systems by entering fabricated e-mini S&P 500 sell trades into
its manual trading system, which artificially offset buy trades Mr.
Taylor had executed in the market. Mr. Taylor established an $8.3
billion e-mini S&P 500 position in a Goldman trading account
Dec. 13, 2007.
Goldman Sachs said Mr. Taylor's activity was flagged by its
controls Dec. 14, with no impact to customer funds.
"After initially providing false explanations during the trading
day, Taylor admitted his conduct following market close and was
subsequently terminated," a Goldman Sachs spokesman said. "Since
these events, we have enhanced our controls. We're pleased to have
settled this matter."
In November, the CFTC charged Mr. Taylor with defrauding Goldman
by intentionally concealing the true size associated with the
S&P e-mini futures contracts he traded in the Goldman
account.
Goldman shares were off by 71 cents at $116.49 in recent
trading. The stock is up 29% year to date.
Write to Nathalie Tadena at nathalie.tadena@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires