Goldman to Settle Trading Charges

Investment and brokerage giant Goldman, Sachs & Co. will pay $45.5 million to settle charges in the New York Stock Exchange specialist investigation and is cooperating with state and federal investigations of allegedly improper mutual fund activities, according to the company’s annual report.

Goldman Sachs subsidiary Spear, Leeds & Kellogg Specialists was one of five specialist firms that settled with the Securities and Exchange Commission last week for $240 million. The firms were accused of placing their own trades ahead of customers’ business on the floor of the NYSE, skimming profits at the expense of other trades.

In addition to the fine, Goldman Sachs said the settlement included a censure and a cease-and-desist order on similar trades. NYSE officials said new technologies now in place would prevent those illegal trades in the future.

Also in the annual report, the company said it had been contacted by “various regulators including the SEC” regarding its mutual fund activities and that it was cooperating with the investigations.

A spokesman for Goldman Sachs said the company had no comment beyond what was stated in the annual report.

The SEC, the New York state attorney general and other regulators have been probing mutual fund companies over their sales practices, particularly in cases where mutual fund companies pay brokers to promote certain funds to their customers.

The investigation already has resulted in many companies’ giving investors a fuller disclosure of fees and payments related to their investments.

The SEC, which has been making changes in rules governing the mutual fund industry, is promising that dramatic reforms protecting investors from abuses will be in place by early summer.

Goldman Sachs shares fell $2.35 to close at $104.32 on the NYSE.