UK FSA Fines Goldman GBP17.5 Million For Not Disclosing On Tourre

LONDON -(Dow Jones)- The U.K. financial regulator confirmed Thursday that it fined Goldman Sachs Group Inc (GS) GBP17.5 million--one of the biggest fines in the U.K. banking industry--for failing to disclose details about Fabrice Tourre, the London-based trader at Goldman who was accused of fraud in an April lawsuit by the U.S. Securities and Exchange Commission.

Tourre was being investigated by the SEC over his role in the creation and sale of a synthetic collateralized debt obligation called Abacus 2007 AC-1.

Unlike securities that are backed by actual mortgages, the synthetic CDO represented a bet on a set of "reference" mortgage-backed securities. The SEC alleges Tourre didn't tell clients that a hedge fund helped select the reference securities and was betting against them.

Goldman agreed in July to pay $550 million to settle the SEC civil charges, but Tourre is fighting the allegations.

The FSA said Thursday that the SEC began making enquiries about Abacus in August 2008. Tourre then transferred to Goldman Sach's office in London in November 2008.

The FSA said Goldman "did not have effective systems and controls in place to ensure that relevant information about the SEC investigation was shared between Goldman Sachs & Co and the people within (the U.K. unit) Goldman Sachs International, who needed to know about it."

"In particular, GSI did not have effective procedures in place to ensure that its compliance department was made aware of the SEC investigation so that it could consider whether any notifications needed to be made to the FSA in compliance with GSI's regulatory reporting obligation," the FSA said.

Goldman is expected to acknowledge its error in not informing the FSA about Tourre's case, the Wall Street Journal reported Thursday.

The largest fine by the FSA, worth GBP33.32 million, was levied against a J.P. Morgan Chase & Co. (JPM) unit in June for failing to separate client money from the firm's.

"We have repeatedly stressed the importance of firms self-reporting regulatory issues to the FSA in a timely way. GSI 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," said Margaret Cole, Managing Director of Enforcement and Financial Crime at the FSA.

"This penalty should send a message, particularly to the senior management of large institutions, of the need to have their firm's U.K. reporting obligations at the forefront of their minds," Cole said.

(David Enrich and Brett Philbin contributed to this article.)

Copyright © 2010 Dow Jones Newswires

 

 

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