WASHINGTON May 9 A former accountant at the
U.S. Securities and Exchange Commission on Tuesday settled
parallel criminal and civil charges, after he was caught
illegally trading options and lying about it while employed at
David R. Humphrey, 60, who worked in the SEC's Division of
Corporation Finance for 16 years, pleaded guilty to filing false
ethics forms in order to conceal his trading, the Justice
The SEC also on Tuesday announced civil securities fraud
charges against Humphrey, saying he "largely conducted this
improper trading strategy using his SEC computer during
business hours," filed false ethics forms disclosing his
holdings and traded other prohibited securities, including put
options on Citigroup shares.
This trading, the SEC added, was conducted for his own
accounts, as well as for his mother and a friend. When he was
confronted by agents in the SEC's inspector general's office in
2014, the SEC said, he continued to lie about his trading.
In a settlement that is subject to court approval, Humphrey
will pay more than $108,000 in penalties, ill-gotten profits and
pre-judgment interest and will be permanently suspended from
practicing as an accountant on SEC matters, the regulator said.
Kenneth Lench, an attorney for Humphrey, said his client
"accepts responsibility and is looking forward to putting this
matter behind him."
The SEC's charges against Humphrey represent a rare instance
of the agency taking enforcement action against one of its own
While several other former SEC staffers have faced criminal
prosecutions in the past for ethics violations related to
trading, the SEC did not take parallel civil actions against
The SEC's choice to invoke civil securities fraud charges
against Humphrey for ethics violations is also unusual.
Typically, such charges are levied against individuals and
companies that defraud investors.
Reuters first reported about the pending criminal and civil
cases against Humphrey last week.
The SEC has strict securities trading rules for its
employees, as many of them have access to highly sensitive,
non-public and potentially market-moving information.
SEC employees are banned from holding stock in companies
directly regulated by the SEC, such as banks, and they are also
required to get clearance prior to trading. Trading in options,
or other financial instruments that derive value from
securities, is also banned for all SEC employees.
Humphrey is not accused of using material non-public
information for his trades, and in fact the SEC said he often
suffered "significant losses."
(Reporting by Sarah N. Lynch; Editing by Dan Grebler)