Rough day for Goldman Sachs

Goldman Sachs is set to pay a $7 million settlement in the face of federal regulators’ civil charges that its futures brokerage business failed to diligently supervise activity in trading accounts for two years.

News of the fine comes the same day as a harshly worded public resignation letter from one of its executive directors. Greg Smith penned an op-ed piece for the New York Times to coincide with his departure from the firm (read Why I am leaving Goldman Sachs).

From 2007 to 2009, Goldman Sachs Execution & Clearing failed to investigate signs of questionable conduct by an unnamed brokerage firm that was one of its clients, according to the Commodities and Futures Trading Commission (CFTC).

The activities in question included the fact that the broker-dealer distributed a false statement that was allegedly “issued by a non-existent GSEC affiliate”, according to the CFTC.

The statement misrepresented the supposed firm’s performance, but rather than take action against the broker-dealer’s infraction, Goldman Sachs merely advised him against issuing false documents.

Goldman received over $1 million in fees and commissions for the transactions it made on behalf of the brokerage firm, according to the agency.

The CFTC has reached a settlement with the Wall Street bank, which has agreed to pay a $5.5 million civil fine for not “diligently supervising” an account held by the broker-dealer.

The bank has also agreed to pay $1.5 million in restitution for the fees it collected from the customer after providing clearing services to the broker-dealer.

Indeed, these charges may come as a relief to the bank after they only narrowly escaped possible civil fraud charges, or aiding and abetting charges from the CFTC.

Goldman has claimed that changes have been made to its supervision policies, procedures and training to prevent a recurrence, and on Tuesday, despite the charges, the bank’s shares rose 5.8% to $123.78.