FSA slaps Goldman with hefty £17.5m fine

It's one of the regulator's heaviest penalties - but at Goldman, you can find this kind of cash down the back of the van der Rohe sofas.

by James Taylor
Last Updated: 19 Aug 2013
Goldman Sachs, everyone's favourite mega-rich Wall Street behemoth, has had its wrists slapped by a regulator again: this time it's the UK's very own Financial Services Authority, which has just fined it £17.5m for failing to disclose that it was under investigation by the FSA's US counterpart, the SEC. By FSA standards, this is a pretty hefty sum. But by Goldman standards, this is the kind of wedge that one of its top investment bankers would expect to hit his account in a good bonus year. In fact, having just lost European M&A head Simon Dingemans to GlaxoSmithKline, it's probably broken even for the week...

Goldman attracted the ire of the FSA because it failed to admit that it was being investigated by the SEC over its marketing of a sub-prime mortgage investment product (it neglected to mention that hedge fund Paulson helped to put the product together - while simultaneously betting that it would fail). This was particularly bad, because the trader at the centre of the row, Fabrice Tourre, had transferred to London and thus came under the auspices of the FSA.

This little row had already cost Goldman $550m, which is what it agreed to pay the SEC to settle the case. Now it can add another £17.5m to the bill, courtesy of the FSA - a charge that would apparently have been even higher had Goldman not ’fessed up early. In its statement, the FSA said Goldman '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 authorised firm.' So Goldman didn't mean not to tell them, it just forgot. Right...

The FSA has had a lot of stick for being too chummy with the banks, so it's good to see it cracking down a bit. But the fact remains that this kind of sum is a bit of a drop in the ocean for Goldman. Just after the SEC announced its probe, Goldman reported a profit of $3.5bn for the first quarter of this year, and said it was putting $5.5bn into its compensation pot to share out among its staff. Many of its top bankers and traders probably got a bonus this year that was bigger than this fine.

Speaking of which, this week has also seen Simon Dingemans, one of Goldman's top rain-makers in London, leave the bank to join GSK as FD. That's a huge lifestyle change for Dingemans, not least because he's presumably taking a massive pay cut. So while most of the speculation has centred on what this means for GSK (is it on the M&A trail again, despite boss Andrew Witty’s insistence there'll be no more huge deals?), we'd be equally interested to know why he’s moving. Did he just get fed up of dinner party guests wrinkling their noses up when he told them what he did for a living?

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