Judicial Watch • SEC Compliance Officials Investigated For Insider Trading

SEC Compliance Officials Investigated For Insider Trading

SEC Compliance Officials Investigated For Insider Trading

MAY 15, 2009

Two enforcement officials at the U.S. government agency that supposedly protects investors and maintains a fair market have for months been under federal investigation for illegal insider trading. 

The U.S. Securities and Exchange Commission attorneys, who have access to sensitive information relating to agency probes, drew suspicion with unusually frequent stock trades over a two-year period. A few months ago, the Department of Justice fraud and public corruption division launched a probe into the matter, which was first investigated by the SEC Inspector General.  

In a report the government fought to keep from the public, the inspector general reveals that the SEC has no compliance system in place to ensure that employees—such as the two suspected attorneys—with tremendous amount of nonpublic information don’t engage in insider trading. The 51-page report, which redacts the suspects’ names, was disclosed this week by an Iowa senator who is a ranking member of the Senate Finance Committee. 

It says that the enforcement attorneys, one male and one female, each make more than $160,000 a year and have stock portfolios estimated to be worth more than that. They often sent each other electronic mail about their stock transactions and both traded in all their stock in a large financial company after a colleague informed them it was under investigation for violating SEC rules. 

The report concludes that there is evidence of suspicious activity, improprieties and trading on nonpublic information and that at least one additional SEC attorney committed violations of different aspects of the agency’s reporting requirements.  

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