David Nydam is CEO of Business Intelligence Advisors, Inc. This post is based on a BIA publication. Related research from the Program on Corporate Governance includes Insider Trading Via the Corporation by Jesse Fried (discussed on the Forum here).
Introduction
In this post, we analyze statements made by Senators Richard Burr and Kelly Loeffler in response to allegations of insider trading. While many U.S. Senators had been actively trading stocks before the spread of the coronavirus caused U.S. markets to fall, Mr. Burr and Ms. Loeffler have attracted the highest level of media attention surrounding their actions. This is in part because they both sit on the Senate Health Committee and attended the Committee’s January 24 closed-door briefing on the coronavirus just prior to their stock trades. These trades reportedly saved Mr. Burr and Ms. Loeffler $250,000 and $480,000 in losses respectively. Moreover, shortly after the trades in question, Mr. Burr, who is also the Chair of the Senate Intelligence Committee and receives daily briefings on the pandemic, made public statements downplaying the risk of the spread of the virus, and Ms. Loeffler made public statements downplaying its economic impact. Our analysis shows that it is likely that both Ms. Loeffler and Mr. Burr portrayed the impact of the virus in a more positive light than they believed, and that they both made or authorized inappropriate trades based on what they knew by virtue of their positions.