S.E.C. Official Charged With Making False Statements

A Securities and Exchange Commission official was criminally charged on Tuesday with making false statements about stock holdings that he wasn’t allowed to own under the agency’s ethics rules.

The official, Steven Gilchrist, a compliance examiner in the New York office of the S.E.C., was arrested Tuesday morning and was scheduled to appear in court in the afternoon. He faces three counts of making false statements, with a maximum possible prison sentence of 15 years.

On three occasions this year, Mr. Gilchrist falsely told the S.E.C. that his stock holdings were in compliance with the ethics rules or that he no longer owned certain prohibited stocks, prosecutors claim. Those rules, put in place in August 2010, bar S.E.C. employees from owning stock in companies regulated by the agency.

In actuality, Mr. Gilchrist continued to own prohibited stocks in six companies, according to the criminal complaint.

“As an S.E.C. examiner, Steven Gilchrist had a duty to avoid conflicts of interest that might compromise or even appear to compromise his integrity,” Preet Bharara, the United States attorney in Manhattan, said in a statement. “Instead, as alleged, he violated the S.E.C.’s internal rules about stock ownership and repeatedly lied to the S.E.C. about his holdings.”

A lawyer for Mr. Gilchrist, Laura Miranda, could not be reached immediately for comment.

According to federal prosecutors, Mr. Gilchrist failed to divest his holdings of prohibited companies when the new rules took effect, instead transferring the stock to a joint brokerage account that he controlled. He also purchased more prohibited stock without clearing the transactions with the S.E.C.

Before the rules went into effect, Mr. Gilchrist owned shares of Bank of America, Citigroup, Morgan Stanley and the insurance companies Ambac and MBIA.

He requested a waiver in 2011 to continue owning shares of Bank of America, Citigroup and Morgan Stanley, saying he had inherited them from his father and that he did not actively trade them, the complaint says. But the request was denied.

Then, in January 2012, Mr. Gilchrist opened a joint brokerage account with his mother and transferred shares of Citigroup and Morgan Stanley into the account. Mr. Gilchrist had “complete control” over the account, prosecutors say.

He later transferred his Bank of America stock into the joint account, and also purchased shares of JPMorgan Chase through the account. Later that year, he transferred his Ambac and MBIA stock into the account as well.

But in January 2013, Mr. Gilchrist submitted a certification to the S.E.C. that his stock holdings were in compliance with the ethics rules. And on two occasions in February, he claimed that he no longer held or had sold his holdings in the prohibited companies, according to the complaint.

“Making false statements to government agencies undermines the foundation of public integrity,” Carl Hoecker, the S.E.C. inspector general, said in a statement. “My office investigates these matters thoroughly and today’s arrest exemplifies our commitment to working with the S.E.C. to improve and protect its programs and operations.”