The Securities and Exchange Commission (SEC) has filed a lawsuit against Robert Brian Thompson.
The relevant complaint, seen by FX News Group, was submitted at the Virginia Eastern District Court on November 8, 2024.
The SEC’s complaint alleges that, from at least October 2023 through January 2024 (the “Relevant Period”), Thompson, then a senior banking supervisor and examiner at the Federal Reserve Bank of Richmond, unlawfully traded in stocks and options of at least two banks that were under his supervisory purview based on inside information.
As a senior employee at the Federal Reserve Bank – one of twelve regional Federal Reserve banks that supervise and regulate the U.S. banking system under the oversight of the Board of Governors of the Federal Reserve System – Thompson had regular access to material nonpublic information about numerous publicly-traded banks, including unreleased earnings data; capital, liquidity, and risk levels; and records of bank examinations, stress tests, and other regulatory events.
For that reason, the Federal Reserve’s policies and procedures required Thompson to keep confidential (and not use for any non-official purposes) all nonpublic information obtained through his work.
In addition, a federal regulation prohibited Thompson from trading in bank securities altogether, given the conflict of interest such trading would create with his supervisory and regulatory responsibilities.
However, during the Relevant Period, Thompson used material nonpublic information that he obtained through his work at the Federal Reserve Bank to trade in stock and options of at least two publicly-traded banks within his supervisory portfolio – New York Community Bancorp, Inc. (NYCB) and Capital One Financial Corporation.
Thompson attempted to evade scrutiny for his unlawful trading by submitting false certifications to the Federal Reserve. Thompson’s certifications falsely represented that he had no bank securities holdings and had not engaged in any trading prohibited by law or Federal Reserve policy, which he knew was untrue.
According to the complaint, Thompson placed each of his unlawful trades on the basis of material nonpublic information he received from his job about the relevant bank’s upcoming earnings announcement or other disclosure that Thompson knew or believed would cause the stock price to move in a direction favorable to his stock or options position.
In placing each of those trades, Thompson knew or at least recklessly disregarded that he was trading based on information that was material and nonpublic and that using the information to enrich himself through trading was a breach of his duties as a Federal Reserve Bank employee.
Through his unlawful trades, Thompson obtained ill-gotten profits of at least $584,873.
The SEC accuses Thompson of violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
The Commission seeks, inter alia, a Court order directing Thompson to disgorge all ill-gotten gains he received as a result of the violations alleged in the complaint, and directing him to pay civil money penalties pursuant to Exchange Act Section 21A [15 U.S.C. § 78u- 1].
