Goldman Sachs settles short-sales allegations
Associated Press business staff, 04 May 2010
WASHINGTON — Goldman Sachs has agreed to pay $450,000 to settle regulators’ allegations that it violated a rule related to short-selling of stocks in 2008-2009, it was announced Tuesday.
The banking company did not admit or deny wrongdoing in paying the civil penalties in agreements with the Securities and Exchange Commission and the New York Stock Exchange’s regulatory arm.
The case involving Goldman’s stock-trading business is unrelated to the SEC’s civil fraud charges filed against the firm last month over mortgage securities transactions it arranged. Goldman has denied the allegations in that case and said it will contest the charges in court.
The rule in the short-selling case involves naked short-selling and was installed by the SEC at the height of the market distress in the fall of 2008.
Short-sellers bet against a stock, in a practice that is legal and widely used on Wall Street. They often borrow a company’s shares in a short sale, sell them, and then buy them when the shares decline — pocketing the difference in price. Naked short-selling occurs when sellers don’t own or borrow the shares before selling them, and then look to cover positions sometime after the sale.
The SEC rule includes a requirement that brokers must promptly buy or borrow securities to deliver on a short sale.
