(Adds former SEC litigator comment on unusual nature of case)
By Sarah N. Lynch
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 filed 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
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, 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 other former SEC staffers have faced criminal
prosecutions for ethics violations related to trading, the SEC
did not take parallel civil actions against them.
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.
The use of securities fraud charges is "unorthodox," said
Matthew Solomon, a partner at Cleary Gottlieb Steen & Hamilton
who previously served as the SEC's top litigator.
"Fundamentally, this is a case about lying on government
forms, which is classically criminal in nature."
Reuters first reported about the pending charges against
Humphrey last week.
The SEC has strict securities trading rules for its
employees, as many of them have access to 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
is also banned.
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)