SEC Charges Former Staffer With Securities Fraud

By:
Chris Gaetano
Published Date:
May 10, 2017
SECURITIES-AND-EXCHANGE-COMMISSION-facebook

In an irony worthy of Sophocles, the Securities and Exchange Commission has charged a former staffer with using government resources to make unauthorized trades for himself, his mother and a childhood friend. The complaint alleges that David R. Humphrey, who worked for the SEC from 1998 to 2014 first as a staff accountant and later as a branch chief in the Division of Corporate Finance, used his computer at the commission's office to buy and sell options in prohibition of the agency's ethics rules. This included options in Citigroup, which the SEC directly regulates. He made these trades to benefit both himself and, later, his mother and a childhood friend of his. Humphrey was aware that such actions were a violation of SEC policy and so engaged in a series of deceptions to hide his activities. For instance, he listed his employer on his E*Trade account as "federal government" versus the SEC specifically. He also, on several occasions, failed to disclose his activities to the SEC on his annual OGE Form 450 and did not pre-clear securities transactions with the Ethics Office as he should have. He also failed to disclose he was trading on behalf of his mother and friend. Finally, the SEC said that he falsely claimed his friend had 6 to 9 years of investment experience and that his knowledge was extensive, when in reality this person was an unsophisticated investor with limited knowledge of securities trading and no personal experience trading in options. 

“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. 

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.

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