Britain’s financial watchdog fined Goldman Sachs Group Inc. 17.5 million pounds ($27 million) for failing to tell the regulator it was the subject of a U.S. probe, reviving disclosure headaches for the Wall Street powerhouse.
The fine — one of the biggest imposed in Britain — stemmed from Goldman’s troubled Abacus mortgage-security product, which was the focus of an investigation by the U.S. Securities and Exchange Commission.
But it was not the Abacus product that put Goldman at odds with Britain’s Financial Services Authority. Instead, it was the firm’s failure to inform the FSA that it was facing an SEC probe.
“Goldman Sachs International did not set out to hide anything, but its defective systems and controls meant that the level and quality of its communications with the FSA fell far below what we expect of an authorized firm,” FSA director Margaret Cole said in a statement Thursday.
In a terse response to the fine, a Goldman Sachs spokeswoman said, “We’re pleased the matter is resolved.”
In July, Goldman agreed to pay $550 million to settle civil fraud charges over how it marketed the Abacus subprime mortgage product, ending months of negotiations with the SEC that rattled the bank’s clients and investors.
Goldman had known for months that charges from the SEC were possible, but it did not report it to shareholders, regulators or clients. Its shares fell 12 percent April 16, the day the SEC sued. That was seven months after the bank received a Wells Notice alerting it to potential charges.
Jacob Zamansky, an attorney who is representing shareholders in a class-action lawsuit against Goldman, said such suits will be bolstered by the FSA fine.
The Financial Industry Regulatory Authority also was investigating Goldman’s failure to report the Wells Notice that it received in September regarding trader Fabrice Tourre.
Tourre, a French banker, was involved in marketing the Abacus product. Tourre, who had dubbed himself “Fabulous Fab,” denied allegations that he or the bank misled investors over the high-risk Abacus product.
Tourre marketed the Abacus product in 2007 — just before the credit crisis that rattled markets and caused a huge slump in the value of many mortgage-related debt products.
The FSA said Goldman failed to notify it of the fact that the SEC had issued Wells Notices to the bank and to Tourre.
Goldman Sachs shares were up 1.8 percent, to $150.20, in morning trade on the New York Stock Exchange.
