SEC Compliance Examiner Charged In Manhattan Federal Court For Making False Statements Related To Prohibited Financial Holdings
Preet Bharara, United States Attorney for the Southern District of New York, and Carl W. Hoecker, Inspector General of the Securities and Exchange Commission, Office of the Inspector General (“SEC-OIG”), today announced charges against STEVEN GILCHRIST, a Securities and Exchange Commission (“SEC”) Compliance Examiner in the SEC’s New York Regional Office, for making false statements to the SEC regarding his ownership of various securities he was prohibited from holding under SEC ethical rules. GILCHRIST was arrested this morning and will be presented in Manhattan federal court before U.S. Magistrate Judge Kevin Nathaniel Fox this afternoon.
Manhattan U.S. Attorney Preet Bharara said: “As an SEC examiner, Steven Gilchrist had a duty to avoid conflicts of interest that might compromise or even appear to compromise his integrity. Instead, as alleged, he violated the SEC’s internal rules about stock ownership and repeatedly lied to the SEC about his holdings. We will not tolerate abuses of trust and violations of law by individuals tasked with safeguarding our markets.”
SEC Inspector General Carl Hoecker said: “Making false statements to government agencies undermines the foundation of public integrity. My office investigates these matters thoroughly and today’s arrest exemplifies our commitment to working with the SEC to improve and protect its programs and operations.”
According to the allegations contained in the Criminal Complaint unsealed today:
Among a Compliance Examiner’s duties in the SEC’s New York Regional Office are overseeing broker-dealers, investment advisers, investment companies, clearing agencies, and others regarding their compliance with the nation’s securities laws. As an SEC employee, Gilchrist is subject to rules promulgated by the SEC (“SEC Ethical Rules”) designed to prevent conflicts of interest between employees’ conduct and the SEC’s mission of enforcing the securities laws and regulating the markets.
Beginning in August 2010, changes to the SEC Ethical Rules prohibited SEC employees from purchasing or holding stock in entities directly regulated by the SEC, and required employees to submit any proposed personal transactions in securities to the SEC prior to executing them. The prohibited securities included those of several banks and broker-dealers, including banks with broker-dealer subsidiaries. Individuals who held such stock at the time the changes were implemented were directed to divest their holdings, and provided with instructions on how to do so.
GILCHRIST held stock in several such prohibited companies. As the rule changes took effect, GILCHRIST did not divest his holdings as required. Instead, he transferred his stocks into a new joint brokerage account he shared with a family member and over which he had complete control (the “Joint Account”). In addition, he purchased additional prohibited stock (the “Additional Stock”) without pre-clearing the purchase with the SEC.
On three occasions in 2013, GILCHRIST made false statements to the SEC regarding his stock holdings. First, in January 2013, he falsely certified through an electronic SEC compliance system that as of December 31, 2012, his holdings were in compliance with SEC regulations. Second, on February 13, 2013, he submitted an Executive Branch financial disclosure form that falsely stated that he “no longer held” certain of his prohibited stock holdings, and that omitted any mention of the Additional Stock. Third, on February 22, 2013, GILCHRIST falsely certified through an electronic SEC compliance system that he had sold certain other prohibited stocks. In reality, GILCHRIST continued to hold prohibited stock in six different companies at all relevant times throughout this period. Specifically, the stocks that GILCHRIST claimed he no longer held had only been transferred to the Joint Account, which he controlled.
GILCHRIST, 48, of Bethpage, New York, is charged with three counts of making false statements. He faces a maximum sentence of 15 years in prison.
Mr. Bharara praised the investigative work of the SEC-OIG, and the Criminal Investigators of the United States Attorney’s Office. He also thanked the SEC for its assistance in the investigation.
The case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorney Martin S. Bell is in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.