US financial regulators have ordered fines of US$5.5 million to Goldman Sachs and US$2.9 million to Citigroup Global Markets over recordkeeping failures.
The Commodity Futures Trading Commission (CFTC) finds that Goldman Sachs violated the cease-and-desist provision of a prior order and committed recordkeeping violations in connection with its failure to properly record and retain certain audio files.
The previous order, in November 2019, found that the firm failed to record the phone lines of a trading and sales desk for 20 calendar days in January and February 2014, after its recording hardware malfunctioned following a software patch.
For Citigroup Global Markets, the US Securities and Exchange Commission (SEC) settled cease-and-desist proceedings against the broker-dealer for “willfully violating recordkeeping requirements concerning expenses that the firm incurred in connection with its underwriting business”.
According to the SEC, recordkeeping requirements of the federal securities laws require broker-dealers to make and keep current certain books and records, including ledgers or other records reflecting all assets and liabilities.
The commission states that from at least 2009 through to May 2019, Citigroup Global Markets used an “unsubstantiated and unverified method to calculate and record indirect expenses associated with its work as an underwriter”.
The SEC’s order charges Citigroup with violating Section 17(a) of the Exchange Act and Rule 17a-3 thereunder.
Commenting on the charge, Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement, says: “Underwriters serve a critical role as gatekeepers in securities offerings. They perform essential functions, including investor protection and also helping companies access capital to grow and innovate.
“Recordkeeping failures such as these, perpetuated over at least a decade, can undermine the viability of those functions. The SEC will continue to vigorously enforce the books and records provisions of the federal securities laws, which are crucial to well-functioning markets.”
This news follows the SEC’s decision to fine 10 broker-dealers for recordkeeping failures in early August 2023, and with violations relating to their use of electronic communications and their failure to preserve business messaging conducted on personal devices.
The firms were collectively fined US$298 million by the US securities markets regulator for violating recordkeeping provisions of the Securities and Exchanges Act of 1934 and these firms have already started to introduce changes to improve their compliance policies and procedures.
