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SEC Fines Former Staffer for Ethics Violations

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The Securities and Exchange Commission has charged a former staffer with orchestrating a multiyear scheme to trade in options and other prohibited securities on his own behalf, his mother’s as well as a childhood friend’s while working at the commission.

The agency alleged on Tuesday 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. He agreed to pay more than $108,000.

“As alleged in our complaint, Humphrey never sought preclearance for his prohibited options trades and he filed forms that falsely represented his securities holdings,” said Gerald Hodgkins, associate director in the SEC’s Division of Enforcement, in a statement.

In a parallel action Tuesday, the Department of Justice announced that Humphrey has pleaded guilty to criminal charges stemming from his false federal filings.

According to the SEC complaint, from 1998 to 2014, Humphrey “took affirmative steps to conceal his trading from the Ethics Office and others.”

Further, the complaint alleges that he made “misleading representations on forms filed with broker-dealers and he failed to disclose to [a friend on whose behalf he was trading] that this trading violated government ethics rules and would result in his submitting false annual certifications of his trading activity to the SEC.”

When confronted by agents of the SEC Office of Inspector General in 2014, Humphrey “falsely denied that he had traded in options or in his mother’s brokerage account while employed at the SEC,” the complaint says.

SEC ethics rules prohibit trading in options or derivatives, the SEC states, and also require “staff to disclose their securities holdings and transactions to the agency’s ethics office in annual filings.”

Humphrey agreed to settle the charges and pay $51,900 in disgorgement of profits made in the improper trades plus nearly $4,800 in interest and a $51,900 penalty. He 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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