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Goldman Sachs (GS) Discloses Litigation, Regulator Probes Related to High-Frequency Trading

May 9, 2014 7:47 AM EDT Send to a Friend

In its 10-Q this morning, Goldman Sachs (NYSE: GS) disclosed it is the target of litigation and regulator investigations related to its activities in high-frequency trading. In addition, the company is being probed related to its compliance with the U.S. Foreign Corrupt Practices Act, including with respect to the firm’s hiring practices.

From the Filing (new changes highlighted):

(*New) High-Frequency Trading Litigation. Group Inc. is among the numerous securities exchanges, broker-dealers and purported high-frequency trading firms named as defendants in a putative securities class action relating to high-frequency trading filed on April 18, 2014 in the U.S. District Court for the Southern District of New York. The complaint generally alleges that the defendants violated the provisions of the federal securities laws prohibiting market manipulation and insider trading. The complaint seeks, among other things, equitable and other injunctive relief, as well as unspecified compensatory damages, restitution and disgorgement.

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Regulatory Investigations and Reviews and Related Litigation. Group Inc. and certain of its affiliates are subject to a number of other investigations and reviews by, and in some cases have received subpoenas and requests for documents and information from, various governmental and regulatory bodies and self-regulatory organizations and litigation relating to various matters relating to the firm’s businesses and operations, including:

  • the 2008 financial crisis;
  • the public offering process;
  • the firm’s investment management and financial advisory services;
  • conflicts of interest;
  • research practices, including research independence and interactions between research analysts and other firm personnel, including investment banking personnel, as well as third parties;
  • transactions involving municipal securities, including wall-cross procedures and conflict of interest disclosure with respect to state and municipal clients, the trading and structuring of municipal derivative instruments in connection with municipal offerings, political contribution rules, underwriting of Build America Bonds, municipal advisory services and the possible impact of credit default swap transactions on municipal issuers;
  • the sales, trading and clearance of corporate and government securities, currencies, commodities and other financial products and related sales and other communications and activities, including compliance with the SEC’s short sale rule, algorithmic, high-frequency (*new) and quantitative trading, futures trading, options trading, transaction reporting, technology systems and controls, securities lending practices, trading and clearance of credit derivative instruments, commodities activities and metals storage, private placement practices, allocations of and trading in securities, and trading activities and communications in connection with the establishment of benchmark rates;
  • compliance with the U.S. Foreign Corrupt Practices Act, including with respect to the firm’s hiring practices; and (*new)
  • insider trading, the potential misuse of material nonpublic information regarding private company and governmental developments and the effectiveness of the firm’s insider trading controls and information barriers.

​Goldman Sachs is cooperating with all such regulatory investigations and reviews.





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