The Securities and Exchange Commission announced that the former head trader in residential mortgage-backed securities (RMBS) at Goldman Sachs has agreed to be barred from the securities industry and pay $400,000 to settle charges that he repeatedly misled customers and caused them to pay higher prices.
An SEC investigation found that Edwin Chin generated extra revenue for Goldman by concealing the prices at which the firm had bought various RMBS, then re-selling them at higher prices to the buying customer with Goldman keeping the difference. On other occasions, Chin misled purchasers by suggesting he was actively negotiating a transaction between customers when he was merely selling RMBS out of Goldman’s inventory.
“With no public exchange showing the price for each RMBS trade as it occurs, investors purchasing these securities rely on dealers to be honest about the purchase price they paid,” said Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit. “Chin repeatedly abused his fundamental duty to serve as an honest transmitter of market information so he could increase Goldman’s trading profits and, indirectly, his own compensation.”
The SEC’s order finds that Chin’s misconduct began in 2010 and continued until he left Goldman in 2012. Without admitting or denying the findings, Chin agreed to the entry of the order finding that he violated Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5. He agreed to pay $200,000 in disgorgement, $50,000 in prejudgment interest, and a $150,000 penalty.
The SEC’s continuing investigation has been conducted by Andrew Feller, David London, and Heidi Mitza, and the case has been supervised by Celia Moore and Michael Osnato. The SEC appreciates the assistance of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).