New York-based Goldman Sachs Group Inc. will pay a US$50 million fine to resolve allegations that an employee schemed to steal confidential information and used it to advise clients, the New York Department of Financial Services (NYDFS) announced on Wednesday.
The acting Superintendent of Financial Services in New York, Anthony Albanese, announced the resolution of an enforcement action against Goldman for violating state banking laws by misusing confidential information. The settlement will see Goldman pay US$50 million to the New York State Department of Financial Services (NYDFS), and accept a voluntary three-year ban on new consulting engagements that require the NYDFS to authorize the disclosure of confidential information.
The firm must also admit that an employee engaged in the criminal theft of confidential supervisory information; that its management failed to effectively supervise its employee to prevent the theft; and that it failed to implement adequate policies relating to post-employment restrictions for former government employees.
An addition, Goldman will implement a series of reforms to help ensure compliance with post-government-employment revolving door restrictions and prevent the improper use of confidential regulatory information, the NYDFS says.
According to the regulator, Goldman hired a former bank examiner from the U.S. Federal Reserve Bank of New York to work as an investment banker, and put him to work on financial institutions in violation of a temporary post-employment restriction imposed by the NY Fed. And, the new banker then “wrongfully obtained confidential information”, from a former co-worker at the NY Fed, who has also since been terminated for this conduct, the NYDFS reports.
Separately, Goldman Sachs announced on Wednesday that it has amended its by-laws to adopt proxy access, giving shareholders the ability to include their own nominees in a company’s proxy statement. Under the by-law amendments, shareholders who own at least 3% of the company’s outstanding shares continuously for three years may nominate two candidates, or 20% of the board, whichever is larger.
“Our board is committed to strong corporate governance,” said Lloyd Blankfein, Goldman chairman and CEO, in a statement. “We engaged our shareholders, and those discussions were a critical factor in our deliberations. We are pleased to have established this shareholder right.”
Earlier this year, the shareholder advocacy group, the Canadian Coalition for Good Governance (CCGG) called on Canadian public companies to focus on enhancing proxy access and improving shareholder communication. The CCGG recommended that companies adopt policies to enable shareholders to communicate with independent directors about board composition on a regular basis; and called on Industry Canada to amend corporate law to facilitate proxy access.
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Adopting meaningful processes for receiving shareholder input and enhancing proxy access “would make the shareholders’ right to elect directors meaningful and will assist in holding boards accountable and in improving board composition and performance,” the CCGG said.