The Financial Industry Regulatory Authority (FINRA) fined Goldman, Sachs & Co., New York, N.Y., $11 million for failing to supervise equity research analyst communications with traders and clients, and for failing to adequately monitor trading in advance of published research changes to detect and prevent possible information breaches by its research analysts.
The Securities and Exchange Commission (SEC) announced a related settlement with Goldman. Pursuant to the settlements, Goldman will pay $11 million each to FINRA and the SEC.
"Goldman's trading huddles created an environment of heightened risk in which material non-public information concerning analysts' published research could be disclosed to its clients. In addition, the firm did not have an adequate system in place to monitor client trading in advance of changes in its published research," said Brad Bennett, FINRA executive vice president and chief of enforcement.
In 2006, Goldman established a business process known as "trading huddles" to allow research analysts to meet on a weekly basis to share trading ideas with the firm's traders, who interfaced with clients, and, on occasion, equity salespersons. Analysts would also discuss specific securities during trading huddles while they were considering changing the published research rating or the conviction list status of the security. Clients were not restricted from participating directly in the trading huddles and had access to the huddle information through research analysts' calls to some of the firm's high priority clients. These calls included discussions of the analysts' "most interesting and actionable ideas."
In concluding this settlement, Goldman neither admitted nor denied the charges, but consented to the entry of the SEC's and FINRA's findings and admitted to certain facts that were part of a prior settlement with the state of Massachusetts.
In other industry news:
Securian Financial Group, St. Paul, Minn., subsidiaries Securian Casualty Company and Southern Pioneer Life Insurance were upgraded by A. M. Best.
Securian Casualty Company was upgraded to A – third-highest of 16 ratings. Securian's recently acquired life and health company Southern Pioneer Life Insurance was upgraded by Best's to A-. Best's affirmed the A- ratings of American Modern Life, Balboa Life Insurance Company, Balboa Life Insurance Company of New York, Cherokee National Life and CNL/Insurance America. Minnesota Life Insurance Company, Securian's largest subsidiary, had its A+ rating affirmed by Best's.
The Retirement Plan Services of Lincoln Financial Group, Radnor, Pa., made enhancements to its LifeSpan customized model asset allocation program for employer-sponsored retirement plans.
Lincoln now offers plan sponsors and consultants the option to delegate the fiduciary responsibility associated with developing, monitoring and updating the model portfolios to the investment expertise of Ibbotson Associates. Ibbotson will create a series of model portfolios, including target date, target risk and retirement income, based on its patented lifetime asset allocation methodology. Ibbotson will use the plan lineup's investment options, which undergo rigorous analysis and are carefully selected by plan sponsors and consultants, to implement the diversified model portfolios.
Under this program, plan sponsors or their consultants may choose from an array of model portfolios designed to accommodate varying participant investment objectives, including:
- Target date models;
- Target risk models;
- Retirement income models for investors closer to retirement;
- Combination target risk and date models offering participants a choice of conservative, moderate or aggressive glidepaths based on their years to retirement and risk preference.
The LifeSpan models may be offered as a Qualified Default Investment Alternative and also are available to ERISA and non-ERISA plans.
