Goldman Sachs Execution & Clearing fined for “inadequate” short sell delivery procedures

Goldman Sachs Execution & Clearing (GSEC), the clearing agency subsidiary of the investment bank, has been fined USD450,000 by the US Securities and Exchange Commission (SEC) for installing “inadequate” short sell delivery procedures.

GSEC, which neither admitted nor denied any wrongdoing, failed to meet standards laid out in Rule 204T of Regulation SHO “on certain occasions” during December 2008 and January 2009, according to the regulator.

Rule 204T was introduced as a temporary measure in October 2008 (being made permanent in July 2009) as a response to the SEC’s concern that naked short selling was driving down securities prices. It stipulated that clearing agencies had to, in the case of 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”.

According to the SEC, GSEC responded to the rule 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”.

Half of the fine will be paid to NYSE Regulation, with the other half a civic money penalty.