SEC Officially Above The Law: Prosecutors Decline To Charge SEC Employee For Violating Internal Rules

Two weeks ago we wrote of SEC compliance examiner (yes, compliance examiner) Steven Glichrist who was arrested for being non-compliant with the SEC’s ethics requirement to disclose his financial holdings. “New York-based SEC employee Steven Gilchrist was charged with three counts of making false statements regarding the nature of his personal financial holdings. As WSJ reports, the 48-year-old compliance examiner at the agency, allegedly certified that his stock holdings were in compliance with the agency’s ethics rules, when in reality he had held shares of six companies that agency staffers are barred from holding. The SEC is “very disappointed that an employee allegedly made false statements to conceal prohibited holdings after being told by our ethics office to divest.” Fast forward to today when we learn that not only was the SEC not disappointed when another SEC employee was found to have flouted virtually the same rules, but that, inexplicably, federal prosecutors decided not to prosecute.

Why did this anonymous staffer somehow get an immunity from prosecution (and how is he or she any different from Gilchrist)? There is no immediate answer but for some hints we go to the WSJ:

The SEC has strict rules on the stocks employees can hold and goes further in its employee-trading restrictions than many other federal agencies. The rules cover a spouse’s holdings as well.


The watchdog’s office found evidence that the employee’s spouse owned stakes in entities “directly regulated” by the agency, which are prohibited, according to the report. The employee also didn’t disclose “the vast majority” of his or her spouse’s holdings through required agency channels, which include getting clearance to make trades through a computer system, the report said.


The report said there was evidence that the “senior officer” shared non-public information with his or her spouse. There was also evidence that the employee had worked on a matter that involved former employees of a company in which the spouse owned stock. The referral for the investigation came from the agency’s ethics office, the report said.

Ok, so he clearly broke pretty much every rule in the book, and doubly so considering who his employer is. So his actions surely would have been met with harsh punishment right? Wrong.

Federal prosecutors decided not to prosecute a Securities and Exchange Commission employee who showed signs of flouting rules restricting personal securities holdings, according to a new report from the SEC. The decision to not file charges came in the months before prosecutors charged another SEC staffer for similar alleged conduct. It’s unclear if the investigations of the two are related but the report sheds light on recent steps the agency’s inspector general has taken to investigate employee holdings.


Federal prosecutors declined to prosecute the employee and the watchdog’s office told the agency’s management of the investigation’s findings in early September, according to the report, which did not specify which particular U.S. Attorney’s office was involved. The agency’s administrative response to the investigation was “pending” as of the end of September.


It is not clear what role, if any, federal prosecutors played in the investigation. The SEC didn’t immediately respond to a request for comment on this and whether this probe is linked to the investigation of New York-based employee Steven Gilchrist.

What else is there to say here: the regulator in charge of enforcing a fair and honest “market” picks and chooses which of its employees should comply with the rules that the same regulator is supposed to enforce upon everyone else.

And some still wonder why no rational human being, who manages their own and not other people’s money, opts out of this manipulated, canterally-planned, algorothmic casino.


via Zero Hedge Tyler Durden

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