Securities Law Updates | New Releases/No Action Letters

May 5, 2010

SEC Releases Cease and Desist Order Against Goldman Sachs Execution & Clearing, L.P.

Cease and Desist Order Against Goldman Sachs Execution and Clearing, L.P.
File No. 3-13877, Release No. 62025, 5/4/2010

SEC Releases Cease and Desist Order Against Goldman Sachs Execution & Clearing, L.P.

The Securities and Exchange Commission (“SEC,” or “Commission”) has released an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”) against Goldman Sachs Execution & Clearing, L.P. (“GSEC”).

Specifically, the Order found that GSEC violated Rule 204T of Regulation SHO (“Rule 204T,” or “Rule”) on certain occasions in December 2008 and January 2009. Rule 204T was an important part of the Commission’s response to concerns about the effects of “naked” short selling upon securities prices.

The Rule, adopted as an interim final temporary rule on Oct. 17, 2008, required participants of a registered clearing agency such as GSEC to either deliver securities by a trade’s settlement date or, in connection with short sales, immediately purchase or borrow securities to close out the fail to deliver position by no later than the beginning of regular trading hours on the trading day following the settlement date.

GSEC initially responded to the Commission’s enactment of Rule 204T of Regulation SHO by implementing procedures that were inadequate in that they relied too heavily on individuals to perform manual tasks and calculations, without sufficient oversight or verification of accuracy. As a result, GSEC violated Rule 204T by failing to timely close out fail to deliver positions.

In this regard, the Order censured GSEC, directed that GSEC cease and desist from committing or causing any violations and any future violations of Exchange Act Rule 204, and ordered that GSEC pay a civil money penalty of $225,000. GSEC has also agreed to an undertaking requiring it to pay a fine in the amount of $225,000 to NYSE Regulation, Inc. GSEC consented to the issuance of the Order without admitting or denying any of the findings in the Order.

View a PDF of the release

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Companies Mentioned

Securities Law

The following companies are mentioned in Securities Law Updates:

Securities and Exchange Commission

Harris Associates, L.P.

Banc of America Securities LLC

Citicorp USA, Inc.

The Public Employees’ Retirement System of Mississippi

Morgan Stanley & Co., Inc.

Jan Charles Finance S.A.

Park East, Inc.

CIBC World Markets Corp.

Citigroup Inc.

Barclays Capital Inc.

Citigroup Global Markets, Inc.

Dynex Capital Inc.

Citigroup, Inc.

JPMorgan Chase & Co.

Merit Securities Corp.

JPMorgan Securities Inc.

Teamsters Local 445 Freight Division Pension Fund

Aetna, Inc.

Scotia Capital (USA), Inc.,

Cowen & Co., LLC f.k.a. SG Cowen Securities Corp.

Societe Generale

SunTrust Bank

TD Securities (USA), Inc.

BMO Nesbitt Burns Corp. n.k.a. Harris Nesbitt Burns Corp.

Consolidated Leasing Hugoton Joint Venture #2

Buchanan Ingersoll & Rooney Professional Corporation

Consolidated Leasing Anadarko Joint Venture

W. R. Huff Asset Management Co., LLC

Guardian Capital Management

ABN AMRO Bank N.V.

Vesta Insurance Group, Inc.

Free Enterprise Fund

Banc of America, N.A.

Torchmark Corp.

Beckstead and Watts, LLP

Barclays Bank PLC

KPMG Peat Marwick, LLP

Deloitte & Touche LLP

Public Company Accounting Oversight Board

BNY Capital Markets, Inc.

Florida State Board of Administration

Credit Suisse Securities (USA) LLC

Credit Lyonnais Securities (USA) Inc.

The Cleaners & Caulkers Local 1 Pension Fund

Credit Suisse, New York Branch

Ameriprise Financial, Inc. f.k.a. American Express Financial Corp.

Deutsche Bank AG

California Department of Corporations

The Royal Bank of Scotland plc

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