Goldman Agrees to $22 Million Settlement With China Watchdog
(Bloomberg) -- Goldman Sachs Group Inc. agreed to pay part of $22 million to settle allegations by China’s securities regulator over how the Wall Street firm interacted with its local joint venture partner, the first such agreement under pilot rules the nation adopted in 2015.
The China Securities Regulatory Commission agreed with Goldman Sachs under guidelines that allow it to negotiate a settlement rather than to simply issue a fine. The deal relates to how Goldman Sachs’s Asia unit worked with Beijing Gao Hua Securities Co., the majority owner of the onshore joint venture, on its trading business. Employees at both firms have agreed to step up internal controls, the CSRC said in a statement late Tuesday.
The settlement underscores Chinese regulators’ willingness to use new approaches to supervision as they increase scrutiny of financial markets. Fines and confiscations levied by the CSRC reached a record $1.59 billion last year, according to official data.
“This case represents a major breakthrough in the history of China’s securities regulatory and administrative law enforcement,” said Melody Yang, a Beijing-based partner at Simmons & Simmons. “We expect this approach will be more widely accepted by the market.”
A total of nine parties, including Goldman Sachs and Beijing Gao Hua, will pay 150 million yuan ($22 million) to settle the case, according to the CSRC notice. It didn’t identify the rest.
“We are pleased to have resolved the matter,” a spokeswoman who represents Goldman Sachs and Beijing Gao Hua said.
Between October 2013 and July 2015, traders at Goldman Sachs’s Asian unit used its account held with Beijing Gao Hua to carry out trades and provided “business guidance” to staff at Beijing Gao Hua, according to the CSRC notice.
“The two parties engaged in other related stock and stock index futures contract transactions during four trading days from May to July 2015,” the notice said. During those three months, the Shanghai Composite Index slumped 18 percent as turmoil gripped Chinese markets.
Goldman Sachs owns 33 percent of Beijing-based Goldman Sachs Gao Hua Securities Co., with the remainder held by Beijing Gao Hua.
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