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Screenshot of a breaking news alert e-mail from Q2 2017
The Securities and Exchange Commission (SEC) charged a former employee with securities fraud in connection with his trading of options and other securities.
The SEC’s complaint alleges that David R. Humphrey, who worked at the SEC from 1998 to 2014, concealed his personal trading from the SEC’s ethics office and later misrepresented his trading activities to the SEC’s Office of Inspector General when questioned during an investigation.
As alleged in our complaint, Humphrey never sought pre-clearance for his prohibited options trades and he filed forms that falsely represented his securities holdings,” said Gerald W. Hodgkins, Associate Director in the SEC’s Division of Enforcement.
SEC employees are subject to rigorous rules regarding securities transactions to guard against even the appearance of using public office for private gain. The ethics rules specifically prohibit trading in options or derivatives. The rules also require staff to disclose their securities holdings and transactions to the agency’s ethics office in annual filings.
According to the SEC’s complaint, Humphrey violated the rules by engaging in transactions involving derivatives, failing to obtain pre-clearance before trading non-prohibited securities, and failing to hold securities for the required period.
The SEC’s complaint charges Humphrey with violating Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act. Humphrey has agreed to settle the charges and pay $51,917 in disgorgement of profits made in the improper trades plus $4,774 in interest and a $51,917 penalty. Humphrey also agreed to be permanently suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies. The settlement is subject to court approval.
In a parallel action, the Department of Justice today announced that Humphrey has pleaded guilty to criminal charges stemming from his false federal filings.