According to FINRA, Goldman Sachs & Co. LLC was fined $6 million for submitting blue sheets that inaccurately reported transaction information and failing to establish an adequate supervisory system for blue sheet compliance.
The firm submitted blue sheets to FINRA that inaccurately reported one or more of 39 separate types of transaction information. In those FINRA blue sheets, the firm failed to include required transactions or transaction information, or included incorrect information for at least 97 million transactions. The firm's blue sheet errors caused it to fail to report or report inaccurately trade information that was critical to FINRA's regulatory function.
Particularly concerning, the firm reported inaccurate execution times of trades, which is a significant piece of information for investigations into insider trading and market manipulation that rely on determining exactly when trades occur.
FINRA found that the firm failed to establish and maintain a supervisory system reasonably designed to achieve compliance with blue sheet requirements. Initially, the firm discovered 18 different types of errors affecting the accuracy of its blue sheets. These discoveries raised red flags that its blue sheet reporting system had other and/or widespread deficiencies, but the firm did not reasonably investigate those red flags. Although the firm continued its internal review, it failed to promptly determine the full scope and impact of blue sheet errors once discovered or ascertain whether there were other errors.
Blue sheets are detailed trading records that firms must provide to regulators upon request as part of investigations into potential market manipulation, insider trading, and other violations. Accurate blue sheet reporting is essential for effective regulatory oversight and market integrity. This case demonstrates that even the largest financial institutions can have significant compliance failures in their reporting systems. The massive scale of the errors (97 million transactions) underscores the importance of robust testing and validation of compliance systems.
