(Adds more background throughout, comments from FINRA)
By Sarah N. Lynch
WASHINGTON, July 1 (Reuters) - Wall Street's self-fundedregulator fined a unit of Goldman Sachs on Tuesday overpricing rule violations stemming from its "dark pool," markingthe latest in a string of recent enforcement actions targetinganonymous trading platforms.
Goldman Sachs Execution & Clearing L.P. agreed to pay an$800,000 fine and settle the case with the Financial IndustryRegulatory Authority, or FINRA, without admitting or denying thecharges.
FINRA said that Goldman's dark pool SIGMA-X executed nearly400,000 trades between July 29 and August 9 in 2011 that were atinferior prices, in violation of investor protection rulesdesigned to ensure customers are getting the best deal.
In addition, FINRA said that between November 2008 andAugust 2011, the bank did not have adequate policies in place toprotect stock quotes.
In addition to paying the fine, FINRA said Goldman has sincereturned $1.67 million to harmed customers.
"FINRA has no tolerance for firms that fail to have robustpolicies and procedures to protect against trading throughprotected quotations," said Thomas Gira, the executive vicepresident of FINRA's Market Regulation unit.
A spokeswoman for Goldman Sachs declined to comment beyondthe details spelled out in the settlement with the regulator.
FINRA's settlement with Goldman on Tuesday comes less than aweek after the New York Attorney General filed a lawsuit againstLX, a rival dark pool operated by Barclays.
That case alleges more grave violations, including claimsthat Barclays lied to investors by giving high-speed tradersunfair advantages, even though the bank had pledged to policethe pool for "predatory" trading.
Barclays is fighting the lawsuit and has retained thehigh-profile law firm Wilmer Cutler Pickering Hale and Dorr LLPto assist in its defense.
The U.S. Securities and Exchange Commission, meanwhile, isalso in the midst of conducting a variety of probes into darkpools and other alternative trading systems over potentialpricing concerns.
Such venues allow investors to trade stocks anonymously andreport trade data after the deals are done, which can be helpfulfor investors who do not wish to tip their hand to the marketabout large trades.
But critics say they are harmful to price discovery. That'sbecause the rise of dark pools has reduced trading on exchangesthat publicly quote prices, potentially eroding market quality.
The SEC recently settled a case with another dark poolcalled Liquidnet over charges that the venue improperly sharedconfidential client data in marketing materials.
SEC Chair Mary Jo White also recently announced that agencystaff is working to craft new rules that would require darkpools and other brokerages that execute trades internally todisclose more information about how they operate.
FINRA also last month for the first time starting a newreporting initiative that gives the public more data about thetrading volumes of dark pools. (Reporting by Sarah N. Lynch; Editing by Susan Heavey)