Goldman Sachs Group, Inc. : Goldman Sachs censured, no further penalty on 2011 warrants case
04/27/2012| 07:14am US/Eastern
(Reuters) - Goldman Sachs on Friday received an official censure, but no further penalty, from the Hong Kong Stock Exchange following the resolution of a case involving a typographical error in the documentation of some warrants it issued in February 2011.
In administering its slap on the wrist to the US investment bank, the exchange said it took into account several mitigating factors including the fact that this was the first such case for Goldman Sachs since it began issuing the products in 2005.
The bank had also maintained dialogue with the exchange after noticing what had been a mistake.
An error in the formula in the documents, which had been prepared by an external agency but reviewed and approved internally by Goldman, meant that the warrants appeared to be worth much more than they were intended to be.
As a result, the bank noticed unusual trading in the warrants which it attributed to increased interest following the Japanese earthquake and tsunami in March last year.
"During the night of 30 March 2011, a member of the GS warrants team was informed by an acquaintance of a market rumour that there was a difference in the formula used in documentation prepared and published by GS in relation to the warrants and the documentation for a similar Nikkei warrant issued by another institution," the exchange said in the release.
The next morning Goldman staff identified the typo and asked its lawyers to advise the exchange. Following a surge in trading activity that morning, the warrants were suspended.
Goldman Sachs offered compensation to affected investors through a buyback program, the exchange said, "at the higher of 110 per cent of their acquisition cost or the highest value they might have reached during the period of suspension".
The exchange said that it would have considered a temporary ban on Goldman issuing new warrants, but because the bank had voluntarily withdrawn from that market anyway between April and November it would not add this punishment.
Goldman Sachs said it was pleased the matter was now closed.
"We look forward to continuing to grow our warrants business in Hong Kong," it said.
(Editing by Nick Macfie)
By Lawrence White