Goldman Sachs has fired several executives in its transaction banking unit for what the bank characterized as “serious violations” of its communications policies, according to a memo seen by Reuters on Wednesday.
The memo stated that the individuals violated the firm’s communication policy, which requires employees to use firm-approved channels for business-related communication. “We take our communications policy seriously, and we expect all of our personnel to comply with it,” the bank said.
Four employees were fired, including Hari Moorthy, a partner at Goldman and global head of transaction banking; Moorthy is no longer listed as a registered broker on the Financial Industry Regulatory Authority’s website.
The fired executives also reportedly failed to cooperate with Goldman Sachs’ compliance department.
Philip Berlinski, the bank’s treasurer, will take over day-to-day management of transaction banking alongside Akila Raman and Luc Teboul. Berlinski is also leading Goldman’s financial technology and consumer business on an interim basis.
The fired executives also reportedly failed to cooperate with Goldman Sachs’ compliance department.
Recordkeeping mandates
Goldman Sachs obviously sought to get out ahead of regulatory authorities here and terminated employees for what has been a persistent issue for many sizable financial services firms – adhering to recordkeeping mandates for their business communications.
This is interesting for several reasons. Goldman Sachs is known for its tough culture; nabbing and completing deals with long working hours to show for it are all part of the operating dynamic at the business. For the company to remove several executives here before any enforcement action had been announced or any scandal brewing in the news is a forceful statement by the business’s top leadership.
Goldman’s actions convey not only the importance of adhering to internal policies and procedures no matter what level of management or seniority is involved, they greatly underscore how significantly communication policies are regarded in regulatory compliance practice today.
Supervise communications
Financial firms’ failure to retain and supervise communications related to their business impedes the regulators from doing their job properly, threatens market integrity, and is a core breach of trust. Regulatory leaders have said as much in their statements issued with their related enforcement actions and enforcement priorities announcements.
The fines have also been quite large, and if you want a rundown, we’re keeping track.
Commissioner Christy Goldsmith Romero at the Commodity Futures Trading Commission recently emphasized that her agency was requiring an admission of wrongdoing as part of its latest round-up of settlement orders with a number of firms last month.
As she said in a statement: “In my enforcement experience, deterrence can be achieved from a defendant having to admit wrongdoing, combined with a penalty. Particularly those defendants with significant resources may view admissions to be more consequential than a penalty.”
Regulators are sending a strong message to the entities they regulate that these failures to preserve off-channel communications are lapses that make their core work as market overseers harder, which creates risk to the markets and to the investors that power them.
Goldman Sachs took some lessons from their directives and from the Department of Justice’s Corporate Enforcement Policy and self-remediated, including holding people responsible for engaging in misconduct.
