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Goldman Action Highlights FINRA Facade

Posted by Larry Doyle on May 6, 2010 12:57 PM |

FINRA is supposed to be the Wall Street cop, right? Is the cop a real cop or more of a facade? Well, when the Wall Street banks which FINRA is charged to oversee do not observe the most basic of FINRA rules and regulations, in my opinion, FINRA is exposed as nothing more than a facade.

Evidence of this was on display just yesterday as Bloomberg highlighted in reporting, Goldman Sachs Said to Be Late to Report SEC Probe to FINRA:

Goldman Sachs Group Inc. was late in notifying the Financial Industry Regulatory Authority that trader Fabrice Tourre might be sued for fraud by the U.S. Securities and Exchange Commission, according to people familiar with the matter.

Goldman Sachs didn’t update Finra on Tourre’s status until this week, more than two weeks after the SEC filed a lawsuit against him and the firm for allegedly misleading investors about a mortgage-linked security, the people said. Under Finra’s rules, Goldman Sachs should have updated Tourre’s file within 30 days of his receiving a so-called Wells notice from the SEC last year.

Penalties for failing to update Finra can include censure, fines, suspension or expulsion from the brokerage industry. In 2004, Finra’s predecessor organization, the National Association of Securities Dealers, fined 29 firms more than $9.2 million for more than 8,000 late disclosures of reportable information about their brokers and prohibited two firms, Morgan Stanley and Wachovia, from registering new brokers for five business days.

Goldman Sachs and Tourre are contesting the SEC’s suit.

The Wall Street Journal reported the lapse on its website earlier today. Spokesmen for Finra and Goldman Sachs both declined to comment.

Goldman did not report the fact that it had received a Wells Notice in its 2009 Annual Report. That fact is a clear indication of Goldman’s arrogant culture. The fact that Goldman did not report this Wells Notice to FINRA is a strong indication as to how Goldman views FINRA. In my opinion, that Goldman view is nothing short of a wide-angled exposure of FINRA as a facade dressed up as a regulator. Or in layman’s terms, FINRA is a pest on the Goldman elephant’s ass.

Self-regulation on Wall Street? That is an oxymoron.


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