Goldman Sachs Group agreed to pay a fine of nearly $27 Million to the United Kingdom’s Financial Services Authority and concede that the company made a mistake in regulatory disclosures about trader Fabrice Tourre, according to people familiar with the situation.
The fine (one of the biggest ever imposed in Britain) was related to Goldman’s troubled Abacus mortgage-security product, which resulted in the investment bank being investigated by the U.S. Securities & Exchange Commission (SEC).
The SEC sued Goldman Sachs and employee Fabrice Tourre in April over claims the firm misled investors in a collateralized debt obligation linked to subprime mortgages, known as the Abacus transaction. The FSA said in April it would investigate the firm’s London office after the SEC filed its lawsuit. Gordon Brown, the prime minister at the time who was facing a May 6 election, called on the FSA to investigate.
The SEC has accused Mr. Tourre, who is on paid leave from Goldman, of arranging the deal despite believing the housing market was about to collapse. Pamela Chepiga, a partner at law firm Allen & Overy LLP who represents Mr. Tourre, couldn’t be reached for comment Wednesday. A Goldman spokesman and FSA spokeswoman declined to comment.
“This penalty should send a message particularly to the senior management of large institutions of the need to have their firm’s U.K. reporting obligations at the forefront of their minds,” said Margaret Cole, the FSA’s managing director of enforcement and financial crime.
The FSA said Goldman Sachs had failed to notify it of the fact that the SEC had issued so-called “Wells Notices” to the bank and to Tourre himself containing allegations of violations of U.S. securities laws relating to the Abacus product.
Goldman neither admitted nor denied legal wrongdoing in agreeing to the settlement with the SEC. However, it acknowledged that its marketing materials for the investment deal at the center of the charges omitted key information for buyers.