[ by Melanie Gretchen ]

Goldman Sachs agreed to settle CFTC allegations that it had failed to adequately supervise its futures traders, following last week's announcement that a former partner had hidden billions in futures positions that resulted in a $118 million loss.  Goldman agreed to a $1.5 million fine. 

CFTC Findings and Allegations. Former Goldman trader Matthew Marshall Taylor, who had attained Partner level at Goldman Sachs, in 2007 camouflaged an $8.3 billion position.  He did this by manually entering fake trades, according to the CFTC complaint.

The CFTC first pursued the trader last month - unsuccessfully - seeking to levy a $130,000 civil penalty against Taylor.  Taylor currently works for Morgan Stanley, but back in 2007, he was a VP at Goldman's Capital Structure Franchise Trading desk.  Goldman surveillance procedures had flagged Taylor's activity and ascertained that no customer funds were affected.  But that was the end of Taylor's illustrious career at Goldman - after unwinding the positions in e-mini S&P 500 futures contracts, and booking a $118mn loss, the firm terminated Taylor's employment.

CFTC Commissioner Bart Chilton criticized the penalty against Goldman as being too low, noting:  "I believe that the monetary penalty should be significantly higher in order to represent a sufficient punishment, as well as to denote a meaningful deterrent to future illegal activity."

For further details, go to [Reuters, 12/7/12].