Former SEC Employee from New Rochelle Faces Fraud Charge

A former Securities and Exchange Commission Compliance Examiner has been charged with “making false statements to the SEC regarding her and her husband’s ownership of various stocks they were prohibited from holding under SEC ethical rules.”

The single charge of making false statements was filed against Eugenia Cantiello, 46, of New Rochelle. United States Attorney Preet Bharara and Carl W. Hoecker, Inspector General of the SEC, made the announcement Friday.

According to Bharara, Cantiello was a Compliance Examiner in the SEC’s New York Regional Office until 2014, where she was responsible for overseeing broker-dealers, investment advisers, investment companies, clearing agencies, and others in their compliance with the nation’s securities laws. Reuters reported that Cantiello held separate stints as Compliance Examiner, first from 1991 to 1999 and again from 2004 to 2014.

Because of her employment, Cantiello was subject to SEC ethics rules “designed to prevent conflicts of interest that could arise when SEC employees hold stock in entities subject to routine SEC examinations.” Those rules prohibit SEC employees from owning stock in entities directly regulated by the SEC, and “require employees to submit any proposed personal transactions in such securities to the SEC prior to executing them.”

The prohibited securities include those of several banks and broker-dealers, including banks with broker-dealer subsidiaries, and SEC employees who owned stock at the time the changes were implemented were directed to divest their holdings, and provided with instructions on how to do so. Spouses and immediate family members also are subject to the same SEC ethics rules.

Prosecutors did not disclose which prohibited stock Cantiello and her husband held, but they owned approximately $50,000 worth of it.

“Despite warnings and reminders provided by the SEC, Cantiello did not divest her and her husband’s holdings as required,” according to Bharara. “Instead, she held on to much of the stock past deadlines imposed by the SEC and later, when the SEC-OIG investigated her holdings, she lied about her conduct in an investigation under oath, falsely claiming – among other things – that she had not been aware that her holdings were prohibited under the SEC Rules.”

She was interviewed about it in 2013, at which time she denied knowledge that the stock was prohibited. But prosecutors said she was made aware of it in 2010 when new rules took effect, according to Reuters.

The charge of making false statements carries a maximum sentence of five years in prison. But Cantiello has entered into a deferred prosecution agreement which provides that the charges against her will be dismissed in three months if she complies with certain conditions and commits no further offenses. Reuters writes that as part of the agreement, Cantiello admitted to the false statements from 2013.

The case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorney Martin S. Bell is in charge of the prosecution.