Articles Posted in Goldman Sachs Group, Inc

Former Stockbroker Raises Over $1.2M from Customers to Remodel His Home
The Securities and Exchange Commission is charging ex-stockbroker Bernard M. Parker with Securities Act of 1933 and Securities Exchange Act of 1934 violations, as well as violations of Rule 10b-5. The regulator says that Parker raised over $1.2M from long-term brokerage customers and others by getting them to think they were buying real estate tax client certificates and would make up to 9% yearly interest.

Instead, says the SEC, Parker only used a small part of that money to buy the liens. He used their other funds to remodel his house, pay his father-in-law’s bills, and make car payments. The agency also claims that the ex-broker conducted the unregistered and fraudulent investment offering using his Parker Financial Services from ’08 to ’14. He also purportedly failed to notify the investment advisory firm and broker-dealer where he was dually registered about his side business.

The Attorney’s Office for the Western District of Pennsylvania has filed criminal charges against Parker in a parallel case over the alleged broker fraud.

Political Intelligence Firm Admits to Compliance Failures
Marwood Group Research LLC has admitted to compliance failures and will settle the SEC’s case against it by paying a $375,000 penalty. According to the Commission, the firm did not properly notify compliance officers about the times that analysts received potential material nonpublic data from government employees.

The firm’s own written policies and procedures are supposed to play a key part in Marwood Group’s efforts to stop nonpublic and confidential data from reaching its clients so as not to influence their decisions regarding securities trading. Yet its misconduct happened in 2013 when analysts were looking for information about pending regulatory approvals and policies at the Food and Drug Administration and the Centers for Medicare & Medicaid Services.
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Goldman Sachs Group Inc. (GS) is folding its BRIC fund and merging it with a broader emerging market fund. The BRIC fund, which invests in Russia, China, Brazil, and India, has been losing money. In its filing to the SEC, the bank said that it doesn’t see the nine-year-old product experiencing “significant asset growth.” Unfortunately for some investors of the BRIC fund, depending on when you invested, you may have lost up to 88%.

The acronym for the fund comes from the names of the countries in which it invested. Goldman’s BRIC fund allowed investors to bet on growth in Brazil, Russia, India, and China. It was Goldman Sachs Chief Economist Jim O’Neill who invented the name, selecting the nations for their potential for growth and their importance to the economy some 14 years ago.

Following an investment boom, these large emerging markets are now starting to falter, as have investors’ previous gains. China is expected to experience its weakest expansion in 25 years and Brazil and Russia are going into recessions. While India has experienced growth, the nation’s prime minister is finding it challenging to put reforms into place.
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SEC Investigating Ex-Oppenheimer Executive for Securities Law Violations

According to, Robert Okin, Oppenheimer & Co.’s (OPY) former retail brokerage head, is under investigation by the Securities and Exchange Commission. In October, the agency’s enforcement division notified Okin that, based on a preliminary determination, it intended to file charges against him for securities law violations, including failure to supervise.

Okin is no longer with Oppenheimer. He resigned earlier this month to pursue “other interests.” Okin denies violating the Securities Exchange Act.

Goldman Sachs Group Inc. (GS) will pay $3.15 billion to buy back residential mortgage-backed securities related to bonds that were sold to Freddie Mac and Fannie Mae. The repurchase represents an approximately $1. 2billion premium and makes the mortgage companies whole on the securities. The RMBS case was brought by the Federal Housing Finance Agency.

It was in 2011 that FHFA sued 18 firms to get back taxpayer money from when the U.S. took control of Freddie and Fannie after the economy tanked in 2008. Goldman is the fifteenth bank to settle.

The firm will pay Fannie May $1 billion and $2.15 billion to Freddie Mac for the securities. The two had purchased $11.1 billion from Goldman Sachs. A few of the other banks that have settled with the FHFA include Morgan Stanley (MS), JPMorgan Chase (JPM), and Bank of America Corp. (BAC). The agency’s remaining RMBS fraud cases still pending are those against RBS Securities Inc. (RBS), HSBC North America Holdings Inc., (HSBC), and Nomura Holding America Inc. (NMR).

FINRA Fines Merrill Lynch, Goldman, and Barclays Capital $1M Each Over Blue Sheet Data

The Financial Industry Regulatory Authority has issued a censure that fines Goldman Sachs & Co. (GS), Merrill Lynch, Pierce Fenner & Smith Inc., and Barclays Capital Inc. $1 million each. The firms are accused of not submitting accurate and complete data about trades conducted by them and their customers to the SRO and other regulators. This information is known as “blue sheet” data. Firms are legally required to give regulators this information upon request.

Blue sheets give regulators specific information about trades, including the name of a security, the price, the day it was traded, who was involved, and the size of transaction. This information is helpful to identify anomalies in trading and look into possible market manipulations.

Goldman Sachs (GS) Group Inc. said it is under scrutiny in probes related to high-frequency trading and whether its hiring practices comply US antibribery laws. This is the first time the firm has publicly disclosed both investigations. The information was made available via Goldman’s quarterly filing with the SEC.

In the bank hiring practices investigation, Credit Suisse Group Ag (CS), Morgan Stanley (MS), UBS AG (UBS), and Citigroup (C) are also under scrutiny. The Securities and Exchange Commission wants to know whether the banks or their staff hired the relatives of well-connected officials in Asia, which could be a violation of the antibribery laws-in particular, the Foreign Corrupt Practices Act, which prevents companies from giving foreign officials items of value in exchange for business. Although it isn’t illegal to hire government officials’ relatives in Asia, hires cannot just be made for the purpose of earning new business.

As for the high-speed trading probe, the US Justice Department, the SEC, New York Attorney General Eric Schneiderman, and the Federal Bureau of Investigation are assessing trades that engage in fast algorithmic trading. Schneiderman wants to know if firms involved in high-speed trading have secret deals with trading venues, such as dark pools and stock exchanges, that lets them trade before other investors.

Goldman Sachs Wants Third Circuit To Look at Vacated Arbitration Award

Goldman Sachs (GS) wants the U.S. Court of Appeals for the Third Circuit to look at a decision by a lower court to vacate a FINRA securities award issued by a panel member that included arbitrator Demetrio Timban, who was indicted on criminal matters and suspended. The securities case is Goldman Sachs & Co. v. Athena Venture Partners LP and involves an investor accusing the firm of making misrepresentations. The U.S. District Court for the Eastern District of Pennsylvania remanded the award, which favored the financial firm.

The district court said FINRA didn’t give the parties three arbitrators who were qualified and said the respondent’s rights were prejudiced. Judge J. Curtis Joyner said that therefore, a “final and definite award” was not issued. Following the scandal involving Timban, FINRA said it now would perform yearly background checks of arbitrators and other reviews before they are given a case.

Flatiron Systems LLC Owner Pleads Guilty to Mail Fraud

In United States v. Howard, investment company owner David Eugene Howard has pleaded guilty to mail fraud charges. He is accused of engaging in a financial scam that obtained about $1.8 million from investors.

Prosecutors say that Howard, who owns Flatiron Systems, used operating agreements, letters, and account statements to make false representations that his company used a proprietary system named “Pathfinder” to trade pooled equity accounts. The Securities and Exchange Commission has submitted an enforcement action against Howard.

A Financial Industry Regulatory Authority Panel is ordering Goldman Sachs & Co. (GS) to pay about $2.5M to Tracy Landow for recommending that she invest in the Goldman Sachs Special Opportunities Fund 2006, which she is now contending was an investment that was not appropriate for her. Landow filed her arbitration claim against the unit and her broker a couple of years ago, claiming that unauthorized trades were made. She also alleged misrepresentation and failure to supervise.

The FINRA arbitration panel determined that Goldman liable, ordering the financial firm to compensate the claimant with $1.6M in damages plus about $1M in interest and additional fees. Broker John D. Blondel, Jr., however, was not found responsible. The panel determined that he did not play a part in the alleged investment sales-related violation, theft, forgery, misappropriation, or fund conversion and he was not accountable for the private equity fund and the transactions that resulted. It is recommending that his name be expunged from the case.

Meantime, Landow’s interest in the fund will go back to the financial firm within 30 days from the award date.

While regulators continue pondering whether to impose more regulations on money market mutual funds, a number of financial institutions, including Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM), Fidelity Investments, BlackRock Inc. (BLK), Bank of New York Mellon Corp. (BK), Federated Investors Inc. (FII), and Charles Schwab Corp.,(SCHW), started disclosing the market-based net asset values of these funds last month. Reasons given for these disclosures included offering greater transparency and giving investors more information about the market. However, some believe there are firms are issuing these disclosures because that is what their competitors are doing.

Currently, money market funds have a $1/share stable net asset value for all investor transactions. The underlying assets of the funds, which are debt securities with high ratings, however, can undergo periodic, small value changes that may slightly affect a fund’s per share market value. This is also called the shadow price, which are reasonable estimates/fair valuations of the price that an instrument could be sold at in a current trade.

A few years ago, the Securities and Exchange Commission approved modifications to its Rule 2a-7 and other rules about money market funds mandating that managers of the funds reveal changes to portfolio holdings and give the regulator the market-based net asset values of the funds. Fund information for each month has to be given to the SEC at a succeeding month. The Commission then makes the information available to the public 60 days after the month to which the data pertains has concluded. These Daily disclosures would make the data more immediate (and relevant) for investors.