A former Richmond Fed bank examiner pleaded guilty to insider trading

A former bank supervisor at the Federal Reserve Bank of Richmond pleaded guilty Tuesday to a four-year scheme in which he misappropriated more than $700,000 by trading stocks in the same financial institutions he supervised.

Chesterfield resident Robert Brian Thompson pleaded guilty in federal court to felony counts of insider trading and making false statements, charges that carry a potential sentence of up to 20 years in prison.

He entered his plea before U.S. District Court Judge Mark Colombell, who allowed Thompson, 43, to remain free on bond pending a March 19 sentencing hearing.

Accompanied by his attorney, Megan Rahman of the Troutman Pepper law firm, and a small group of supporters, Thompson admitted that he used “material non-public information” he obtained through his position at the Fed to execute 69 trades, both buys and sells, worth tens of thousands . shares of more than seven different public financial institutions. The scheme ran from at least October 2020 to February this year.

Thompson personally profited from those trades to the tune of $771,000, an amount he will be forced to forfeit upon conviction.

Among the stocks he traded were Capital One and New York Community Bancorp, both of which were controlled by Thompson at the Fed.

In court filings on his Capital One deals, Thompson used information from an internal Fed email last year that showed the bank’s yet-to-be-released earnings would far exceed market estimates.

Hours before Capital One was set to release those earnings, Thompson bought 7,500 shares of Capital One at a price of $678,000, or $90.40 per share.

The stock jumped 9% the day after the earnings release, and Thompson sold his shares at $100.98 apiece, netting a profit of $79,000.

For his deals with NYCB earlier this year, Thompson again used classified information from the Fed to learn that the bank would announce significant losses on loans it took out as part of its acquisition of bankrupt Signature Bank.

On Jan. 29, Thompson purchased 1,600 NYCB stock options valued at $14,000, which would have allowed him to profit if the bank’s stock price fell.

Two days later, NYCB’s earnings were announced and the stock fell 37%. The next day, Thompson sold his options for a profit of about $505,000. This equated to a 3,745% return on his investment in less than a week.

Federal law prohibits Federal Reserve employees in Thompson’s position from trading in bank securities at all. Employees are required to regularly submit forms for declaring their financial assets.

Thompson pleaded guilty to making false statements by lying on those documents and claiming he did not own such assets. In fact, he had a portfolio of bank stocks and options worth more than $500,000.

Thompson worked at the Fed from 2004 until earlier this year. Most recently, he was the department’s banking examiner, helping to regulate 18 major banks with more than $100 billion in assets.

The U.S. Attorney’s Office indicted him earlier this month. The Securities and Exchange Commission filed civil charges against him. Civil charges at the federal level are usually superseded by criminal cases.

The Richmond Fed said in a statement sent to BizSense earlier this week that it was cooperating with authorities in the Thompson investigation.

“The alleged actions of the former employee are in direct violation of our well-established and well-communicated ethics and conflict of interest policies. As this matter is pending before the court, it would be inappropriate to comment further,” the statement said.

A Federal Reserve Board official also released a statement saying, “The Federal Reserve has no place for the misuse of confidential information. We have strong safeguards in place to ensure that those with access to supervisory information understand their responsibilities and obligations, including an outright prohibition on trading in bank shares. We require regular training and confirmation from our staff that each individual understands and is committed to the highest standards of professional conduct.’

By pleading guilty, Thompson waived his right to an indictment and appeal against his conviction.

Thompson’s case will next go before U.S. District Court Judge Hannah Lauck, who will issue a sentence in March.

Assistant US Attorney Thomas Garnett is prosecuting the case.

Thompson is also represented by John West of Troutman Pepper. An email seeking comment from Thompson’s attorneys was not returned.