Former Richmond Federal Reserve department head is subject to a $652,000 penalty settlement
Robert Brian Thompson, a former senior supervisor and examiner at the Federal Reserve Bank of Richmond, has been found guilty of insider trading and making false statements in a case brought by the Securities and Exchange Commission (SEC).
According to the SEC's complaint, Thompson violated insider trading regulations by trading on material nonpublic information about bank stocks. In October 2023, he obtained advance knowledge of a positive earnings announcement from Capital One and purchased $678,000 worth of the bank's stock hours before the public announcement. In January 2024, Thompson learned of unexpected loan losses worth hundreds of millions of dollars from NYCB and used this nonpublic information to purchase thousands of put options on the bank's stock two days before the announcement.
The SEC also charged Thompson with violating the anti-fraud provisions of securities law, which prohibit trading on material, nonpublic information in breach of a duty of trust or confidence. Thompson was also found to have made false statements to the Richmond Fed about his trading activities.
The legal consequences for Thompson include a final consent judgment requiring him to pay $584,873 in disgorgement of profits plus $67,750 in prejudgment interest. These payments have been addressed by a forfeiture order in a parallel criminal case where Thompson pleaded guilty to insider trading and making false statements. Thompson was sentenced to two years in prison as part of this criminal case.
In addition, Thompson is prohibited from engaging in any deceptive practices that would operate as fraud upon any person in securities transactions. He is also forbidden from tipping, which includes communicating material non-public information about securities or issuers to others for trading purposes while breaching a fiduciary duty or duty of trust. Thompson is also prohibited from making false statements or omitting material facts that would mislead others in securities transactions.
Finally, the Richmond Fed has barred Thompson from the banking industry, but an exemption might be granted independently by the Federal Deposit Insurance Corp., the Federal Reserve Board, and the National Credit Union Administration board. The court entered a bifurcated consent judgment in December, enjoining Thompson from violating the anti-fraud provisions.
In summary, Thompson's insider trading violated SEC rules banning trading on material, nonpublic information, as well as prohibitions against making false statements to regulators. These constitute breaches of the anti-fraud provisions of the Securities Exchange Act enforced by the SEC. If Thompson fails to comply with the Fed prohibition order, he could face fines of up to $1 million or a maximum of five years in prison. The final order also prohibits Thompson from using interstate commerce, mail services, or national securities exchange facilities to commit securities fraud.
In light of the insider trading case against Robert Brian Thompson, his guilty plea has raised questions about the intersection of finance, business, and politics, as well as general-news and crime-and-justice. The SEC's complaint indicated that Thompson's actions, specifically his trades based on nonpublic information about bank stocks, violated both insider trading regulations and anti-fraud provisions of securities law, thereby breaching trust and confidence in the financial industry.
