“Two U.S. Securities and Exchange enforcement officers released nonpublic SEC information to a Federal Bureau of Investigation agent and a short seller who were convicted of securities fraud and conspiracy in 2005, an SEC watchdog’s report said Tuesday. One SEC officer on several occasions talked with the FBI special agent about the progress of agency probes of companies, Inspector General David Kotz said in his semi-annual report to Congress. The IG report outlines Kotz’s investigation into the matter.
Another SEC officer admitted he told the FBI agent’s partner, a financial analyst and short seller, that on at least one occasion “the SEC was conducting an inquiry of certain people about a certain company.”
The report didn’t name the SEC officers or the convicted duo, but sources have confirmed that the report refers to the convictions of short-seller Anthony Elgindy and ex-Federal Bureau of Investigation agent Jeffrey Royer.
The SEC inquiries that the officers disclosed to Elgindy and Royer weren’t public. Elgindy and his associates could use the tips about private SEC probes to “sell short the companies’ stock in order to earn illegal profits,” the IG report said.”
The inspector general recommended disciplinary action against the two SEC regional officers for their disclosures. Both officers have been issued written memos and were required to attend training, the report said.