HOUSTON (CN) - The former CEO of a Houston investment firm made $326,000 by trading on inside information about the firm's clients, federal prosecutors say.
Stephen B. Gray, 57, of Houston, was arraigned Tuesday before a federal magistrate on charges of inside trading and a forfeiture charge.
The U.S. attorney claims claim that during Gray's tenure as CEO of Dennard Lascar Associates he opened a TD Ameritrade account, and in violation of the firm's policy, bought shares from its clients.
Prosecutors' charging documents do not reveal Gray was working for Dennard Lascar at the time. The Houston Business Journal identified the firm's name in an article about the case.
"According to the charges, Gray, as the firm's CEO, had access to press releases and confidential information used to prepare the releases by the firm for its clients prior to their issuance to the investing public," the U.S. attorney said in a statement.
Gray made his illegal trades from September 2009 to May 2012 and profited from fluctuations in the stock prices, prosecutors claim.
In Gray's charging document, prosecutors accuse him of trading on inside information about the firm's client Powell Industries for a profit of $82,570.
They want Gray to forfeit $326,000 in total profits.
If convicted, Gray faces up to 20 years in federal prison and a potential $5 million fine.
He is set for a pretrial conference before U.S. District Judge Melinda Harmon on Nov. 10.
Dennard Lascar's managing partners said in a statement that they were "shocked and extremely disappointed" when they found out the SEC was investigating Gray.
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