Marco Verch/ CC-BY 2.0
Goldman Sachs Group Inc. agreed to pay $15 million to settle a US regulator’s allegations that it failed to disclose pricing data on some swaps transactions.
The Commodity Futures Trading Commission on Monday said a Goldman Sachs unit failed to fully disclose pricing when soliciting US-based clients for some equity swaps in 2015 and 2016.
When it sold a certain swap to clients, Goldman would quote two prices on a swap, one that would be based on tomorrow’s price of an equity index, and one that would be based on today’s price, the CFTC said. Goldman’s staff knew that the same-day swap could be immediately profitable for the bank at times — and start off the buyer of the swap in the red, according to the regulator.
So when Goldman gave the potential buyer the two prices, at times it didn’t disclose the “pre-trade, mid-market mark” for the same-day swap — which would have indicated that the buyer may have been getting a bad deal, according to the regulator. Swap dealers like Goldman are required to disclose those marks.
“Goldman personnel failed to provide the clients with the transparency that the regulations require and communicated in a manner that caused the same-day swaps to appear more economically advantageous to the client than they actually were,” the CFTC said in an order settling the case.
Goldman admitted that for most “same-day” swaps executed in 2015 and 2016 it didn’t properly disclose those pre-trade marks, according to the settlement order. The brokerage didn’t admit or deny other allegations, and a bank spokesperson declined to comment.
The CFTC said the investment bank’s brokerage unit “opportunistically solicited or agreed to enter into same-day swaps only on days and at times that were financially advantageous to Goldman and disadvantageous to its clients.”
