Embattled investment bank Goldman Sachs has been fined $450,000 by the Securities and Exchange Commission (SEC) and the New York Stock Exchange over what regulators say are hundreds of violations involving short sales.
According to the SEC’s complaint, Goldman continued to write naked short sale orders following a ban by regulators two days after Lehman Brothers collapsed in September 2008.
Short-sellers often borrow a company’s shares in a short sale deal, sell them, then buy them back when the shares decline and pocket the difference in price. As reported May 4 by the Associated Press, the SEC requires brokers to promptly buy or borrow securities to deliver on a short sale. In the case involving Goldman, the SEC and the NYSE allege that the company failed to procure shares to cover its customers’ short positions in the time required.
Read the SEC’s complaint.
Meanwhile, Goldman Sachs and Goldman VP Fabrice Tourre face a fraud lawsuit by the SEC, which alleges the bank and Tourre sold a collateralized debt obligation called Abacus 2007-AC1 without disclosing the fact that the hedge-fund firm of Paulson & Co. helped to pick some of the underlying mortgage securities and was betting on the financial instrument’s failure.