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US agrees to deal with SEC staffer in stock-ownership case
February 25, 2014 / 2:01 AM / 4 years ago

US agrees to deal with SEC staffer in stock-ownership case

NEW YORK, Feb 24 (Reuters) - U.S. prosecutors have reached a deferred prosecution agreement with a Securities and Exchange Commission examiner charged with making false statements about his stock holdings that were prohibited under SEC ethics rules, according to a court filing made public Monday.

The U.S. attorney’s office in Manhattan disclosed in the filing that it has agreed to enter into the deal with defendant Steven Gilchrist, who was arrested in November and charged with three counts of making false statements. Gilchrist, a veteran of the SEC’s New York office, faced a maximum of 15 years in prison on those charges.

In deferred prosecution agreements, the government can agree to delay or forgo prosecution if a company or individual meets certain conditions - for instance, admitting wrongdoing, cooperating with investigations, paying a fine or agreeing not to violate the law. If not, the government can prosecute the case.

The filing indicated that the U.S. Probation Office is investigating whether Gilchrist can be supervised during the period of deferral. The terms of the agreement were not disclosed.

The U.S. attorney’s office in New York and an attorney for Gilchrist were not immediately available for comment on Monday evening.

SEC ethics rules prohibit employees from buying or holding stocks in entities that it regulates. Employees are also required to get approval from the SEC’s ethics office before buying stocks.

According to the criminal complaint, Gilchrist allegedly held stocks in companies including Bank of America, Morgan Stanley and MBIA Inc.

Although he was told by the SEC ethics office to sell the holdings, Gilchrist allegedly transferred the shares to a joint account held with his mother, which he controlled, and used that account to buy shares of JP Morgan without disclosing or seeking approval for the purchase, the complaint said.

U.S. prosecutors alleged that Gilchrist lied to the SEC several times about his stock holdings, stating that he no longer held prohibited stock and that he was in compliance with SEC regulations.

Following his arrest in November, Gilchrist surrendered his travel documents and was released on his own recognizance.

Reporting by Jessica Dye; Editing by Kenneth Maxwell

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