Individual Settles SEC Charges for Insider Trading
A former senior bank regulator settled SEC charges for engaging in insider trading.
In the Complaint, filed in the Eastern District of Virginia, the SEC alleged that a Federal Reserve Board senior banking supervisor and examiner, traded in the securities of banks under his supervisory authority using material nonpublic information. The SEC alleged that as a high-level employee, the individual had routine access to "unreleased earnings data; capital, liquidity, and risk levels; and records of bank examinations, stress tests, and other regulatory events." The SEC said that the individual was required to keep this information confidential and was "prohibited... from trading in bank securities altogether."
The SEC alleged that despite those obligations, the individual traded stock and options in at least two publicly traded banks within his supervisory portfolio. The SEC said the individual placed these trades on the basis of inside information he obtained through his role, including advance knowledge of upcoming earnings announcements or other disclosures.
The SEC further alleged that the individual sought to evade scrutiny by submitting false certifications in which he stated that he held no bank securities and had not engaged in prohibited trading. The SEC said that the individual's trading activity resulted in "ill-gotten profits of at least $584,873."
As a result, the SEC charged that the individual violated SEA Sections 10(b) ("Regulation of the Use of manipulative and deceptive devices") and SEA Rule 10b-5 (" Employment of manipulative and deceptive devices").
The individual consented to the District Court's final judgment, which included: (i) a permanent injunction from violating the antifraud provisions of the federal securities laws; (ii) conduct-based restrictions on trading in or communicating material nonpublic information related to securities in breach of a duty of trust or confidence; and (iii) payment of $584,873 in disgorgement and $67,750 in prejudgment interest (deemed satisfied by a forfeiture order in a parallel criminal case).