April 12, 2012

U.S. regulators said on Thursday that Goldman Sachs Group Inc will pay $22 million to settle civil charges that it lacked adequate policies to prevent its analysts from sharing non-public information with Goldman traders and select clients.

Goldman settled with both U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority.

The charges stems from a practice known as "huddles" at Goldman that came to light several years ago where stock research analysts met traders to share their best trading ideas. The ideas were then passed along to preferred clients.

Michael DuVally, a spokesman for Goldman Sachs, said the bank was "pleased" to have resolved the matter.

The regulators said the weekly "huddles" took place from 2006 to 2011 and that analysts would discuss "high-conviction" short-term trading ideas and other "market color" with traders.

Then in 2007, Goldman launched a program called the Asymmetric Service Initiative that allowed research analysts to call a select group of priority clients.

"Higher-risk trading and business strategies require higher-order controls," said Robert Khuzami, the SEC's enforcement director.

"Despite being on notice from the SEC about the importance of such controls, Goldman failed to implement policies and procedures that adequately controlled the risk that research analysts could preview upcoming ratings changes with select traders and clients."

Goldman settled a parallel civil case over the "huddles" with Massachusetts securities regulators in 2011 in which the bank paid a $10 million fine and admitted to certain factual findings - an unusual occurrence for civil settlements.

In the SEC and FINRA settlements on Thursday, the bank admitted to the same facts it admitted in the Massachusetts case. (Editing by Gerald E. McCormick and Andre Grenon)

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