The Federal Reserve Bank of Richmond’s building downtown at 701 E. Byrd St.
A former bank examiner at the Federal Reserve Bank of Richmond admitted on Tuesday to a four-year scheme in which he illegally pocketed more than $700,000 by trading on the stocks of the same financial institutions of which he had oversight.
Chesterfield resident Robert Brian Thompson pleaded guilty in federal court to felony counts of insider trading and false statements, charges that carry a potential prison sentence of up to 20 years.
He entered his plea before U.S. District Court Magistrate Judge Mark Colombell, who allowed Thompson, 43, to remain free on bond until his sentencing hearing on March 19.
Flanked by his attorney Megan Rahman of law firm Troutman Pepper and small group of supporters, Thompson admitted to using “material nonpublic information” that he obtained due to his position at the Fed to make 69 trades, both purchases and sales, of tens of thousands of shares in more than seven different publicly traded financial institutions. The scheme ran from at least October 2020 through February of this year.
Robert Brian Thompson
Thompson personally profited from those trades to the tune of $771,000, an amount he’ll be forced to forfeit once convicted.
Among the stocks that he traded on were Capital One and New York Community Bancorp, both of which were under Thompson’s purview at the Fed.
For his Capital One trades, court filings state that Thompson last year used information from internal Fed emails showing that the bank’s yet-to-be-released earnings would significantly exceed market estimates.
Just hours before Capital One was set to release those earnings publicly, Thompson purchased 7,500 shares of Capital One stock at a cost of $678,000, or $90.40 per share.
The stock jumped 9% the next day after the earnings release and Thompson sold his shares at $100.98 apiece, resulting in a profit of $79,000.
For his NYCB trades earlier this year, Thompson again used non-public information from the Fed to find out that the bank would be announcing significant losses related to loans it took on as part of its acquisition of a then-failing Signature Bank.
On Jan. 29, Thompson purchased 1,600 options on NYCB shares at a cost of $14,000, which would allow him to profit if the bank’s stock price fell.
Two days later, NYCB’s earnings were announced and the stock dropped 37%. The next day Thompson sold his options, reaping a profit of approximately $505,000. That equaled a return on his investment of 3,745% in less than a week.
Federal regulations prohibit employees of the Federal Reserve System in Thompson’s position from trading in bank securities altogether. Employees are required to regularly file forms to declare their financial holdings.
Thompson admitted to making false statements by lying on that documentation and claiming he owned no such assets. In reality, he had a portfolio with more than $500,000 worth of bank stocks and options.
Thompson worked at the Fed from 2004 until earlier this year. He had most recently been a bank examiner in a department that helped regulate 18 large banks with assets of more than $100 billion.
He was charged by the U.S. Attorney’s Office earlier this month. He was also hit with related civil charges from the Securities and Exchange Commission. Civil charges at the federal level are typically superseded by criminal cases.
The Richmond Fed, in a statement sent to BizSense earlier this week, said it cooperated with the authorities during the Thompson investigation.
“The former employee’s alleged actions are a direct violation of our well-established and well-communicated policies on ethics and conflicts of interest. Because this matter is before the court, it would be inappropriate to comment further,” the statement read.
A spokesperson for the Federal Reserve Board also released a statement, saying “There is no place at the Federal Reserve for the misuse of confidential information. We have robust safeguards in place to ensure that those who have access to supervisory information understand their responsibilities and obligations, including the outright prohibition on trading in bank stocks. We require regular training, as well as affirmations by our staff that each person understands and is committed to the highest standards of professional behavior.”
By pleading guilty, Thompson waived his right to an indictment and to appeal the conviction.
Thompson’s case will next be transferred to U.S. District Court Judge Hannah Lauck, who will handle his sentencing in March.
Assistant U.S. Attorney Thomas Garnett is handling the case for the prosecution.
Thompson is also represented by Troutman Pepper’s John West. An email seeking comment from Thompson’s attorneys was not returned.