US Senator Kelly Loeffler (L), R-GA, and husband Jeffrey Sprecher, CEO of Intercontinental Exchange and Chairman of the New York Stock Exchange, on January 6, 2019.
Mandel Ngan | AFP | Getty Images
The Securities and Exchange Commission on Monday issued a sharp warning against trading on non-public information related to the coronavirus — a caution that came days after news of recent stock sales by the CEO of the New York Stock Exchange and his senator wife sparked widespread criticism and calls for investigations.
The statement from the SEC’s co-directors of enforcement about “market integrity” did not refer to those trades by NYSE chief Jeff Sprecher and Sen. Kelly Loeffler, R-Ga.
Those trades, involving sales of up to $3 million worth of securities, came in the weeks before stock market indices dramatically fell in value due to the coronavirus pandemic, and on the heels of a private, all-senators briefing on the virus outbreak from Trump administration officials that Loeffler attended on Jan. 24.
Loeffler said last Friday that the trades were made by third-party financial advisors, without input or the knowledge by either her or Sprecher, who is also CEO of the Big Board’s holding company, Intercontinental Exchange.
Loeffler is, by far, the richest member of Congress, sharing a net worth of about $500 million.
The SEC directors in their statement noted that, “The 2019 coronavirus disease (COVID-19) has impacted the securities markets in unprecedented ways.”
“In these dynamic circumstances, corporate insiders are regularly learning new material nonpublic information that may hold an even greater value than under normal circumstances,” the directors, Stephanie Avakian and Steven Pelkin said.
“This may particularly be the case if earnings reports or required SEC disclosure filings are delayed due to COVID-19,” the directors said.
The statement said that “given these unique circumstances, a greater number of people may have access to material nonpublic information than in less challenging times.”
“Those with such access – including, for example, directors, officers, employees, and consultants and other outside professionals – should be mindful of their obligations to keep this information confidential and to comply with the prohibitions on illegal securities trading,” the directors wrote.
“Trading in a company’s securities on the basis of inside information may violate the antifraud provisions of the federal securities laws.”
The SEC declined to comment when asked if the new statement was spurred by last week’s news about recent trading by Sprecher and Loeffler, and whether the SEC is investigating those trades.
Neither Sprecher nor Loeffler has been accused of wrongdoing by the SEC or any other regulatory or law-enforcement agency.
Financial disclosure forms filed recently by Loeffler reveals that accounts owned by the couple had almost 30 trades in stocks since Jan. 24, the day that she and other senators were briefed about the coronavirus by Trump administration officials. The sales began on the day of that briefing.
Over the next three weeks, Loeffler and Sprecher sold shares worth $1.25 million to $3.1 million, according to disclosure records.
Many Americans have been working remotely from home as companies closed or reduced staff at their physical offices due to the COVID-19 crisis.
Intercontinental Exchange, which owns other exchanges and clearing houses in addition to the NYSE, said in a statement last week that all of the transactions involving the couple were “in compliance” with company policies.
“Mr. Sprecher and Senator Loeffler have made clear that those transactions were executed by their financial advisors without Mr. Sprecher’s or Senator Loeffler’s input or direction,” the company said.
“Such transactions are in compliance with Intercontinental Exchange, Inc. policies and procedures.”
Loeffler, in an interview with CNBC’s “The Exchange” last Friday, said “I am very confident that we have followed the letter and spirit of the law.”
“I had no involvement in the decisions” to trade the stocks, the freshman lawmaker said. “I have no discretion over … our portfolio.”
In a tweet, she called an article exposing her trading “a ridiculous and baseless attack.”
Good government groups have filed complaints with various entities asking for investigations into Loeffler’s trading, as well as into stock sales by several other senators on the heels of the coronavirus briefing: Richard Burr, R-N.C., Diane Feinstein, D-Calif., and James Inhofe, R-Okla.
The group Common Cause said Friday it had filed complaints with the SEC, Justice Department and Senate Ethics Committee “calling for immediate investigations” of Loeffler, Burr, Feinstein and Inhofe “for possible violations of the STOCK Act and insider trading laws.”
The STOCK Act bars members of Congress from using inside information from their official positions for private gain.
Another group, Citizens for Responsibility and Ethics in Washington, filed a complaint with the Senate Ethics Committee asking for probes of Loeffler and Burr for possible violations of the STOCK Act.
Inhofe has said the sales in his accounts were part of ongoing sales he ordered for all his stocks when he became chairman of the Senate Armed Services Committee in September 2018.
Feinstein has said the reported stock sales on her disclosure were made by her husband.
“I have no input into his decisions,” Feinstein said in a statement, which noted that under Senate rules she reports her spouse’s financial transactions.
“My husband in January and February sold shares of a cancer therapy company. This company is unrelated to any work on the coronavirus and the sale was unrelated to the situation.”
Rep. Alexandria Ocasio-Cortez, D-N.Y., has called on Burr and Loeffler to resign, tweeting: “It is stomach-churning that the first thoughts these Senators had to a dire & classified #COVID briefing was how to profit off this crisis.”
“They didn’t mobilize to help families, or prep response. They dumped stock,” Ocasio-Cortez wrote.
In a statement Friday, Burr said his decision to off-load his stock was based “solely on public news reports,” including those from CNBC’s Asia bureaus about the spread of coronavirus.
“Understanding the assumption many could make in hindsight however, I spoke this morning with the chairman of the Senate Ethics Committee and asked him to open a complete review of the matter with full transparency,” Burr said.
On Feb. 13, one week before U.S. stocks began sliding, Burr sold more than $500,000 worth of shares in a single day.
The sales amounted to 33 individual transactions, and if they totaled the high end of the range that Burr reported, around $1.7 million, that would equal nearly all of his net worth.