The Securities and Exchange Commission (SEC) is investigating whether Sen. Richard BurrRichard Mauze BurrMark Walker to stay in North Carolina Senate race Government watchdog faults HHS leadership for sustained public health crisis failures Overnight Health Care — Senators unveil pandemic prep overhaul MORE (R-N.C.) violated federal insider trading laws by selling more than $1.6 million in stocks before the market crashed last year.
In a court filing last week first reported by ProPublica, the SEC revealed that it was probing Burr’s decision to liquidate almost all of his stock holdings on Feb. 13, 2020 after receiving classified briefings about the emerging coronavirus pandemic. The agency is also investigating whether Gerald Fauth, Burr’s brother-in-law, made similar stock sales based on information he received from Burr in a phone call the same day.
“Among other things, the Commission is investigating whether [Burr] sold stocks on the basis of material nonpublic information,” the agency revealed in a declaration filed in the District Court for the Southern District of New York, where it is attempting to force Fauth to comply with a subpoena.
The SEC said it “appears” that Burr had nonpublic information gained through his position as chairman of the Senate Intelligence Committee, his membership on the Senate Health, Education, Labor and Pensions (HELP) Committee, and his former staffers involved in pandemic response when he decided to sell almost all of his stock holdings.
Burr allegedly called his stockbroker the morning of Feb. 13 and instructed the broker to sell more than $1.6 million in equities held in his and his wife’s joint individual retirement account (IRA), according to the SEC. Fauth called his sister — Burr’s wife — two hours later, and the senator called Fauth briefly soon after, the SEC alleged.
Three minutes later, Fauth called his stockbroker and told the broker to sell several stocks in his wife’s IRA, the SEC alleged.
Federal law bans investors from buying or selling securities based on nonpublic information likely to affect the price of the asset once it becomes broadly known. Trading based on nonpublic information, or “insider trading” often allows an investor to avoid major losses or reap major gains.
The STOCK Act also bans members of Congress from using information gained through their office to enrich themselves in financial markets.
Burr’s decision to nearly liquidate his stock holdings likely saved him and his wife hundreds of thousands of dollars in potential losses. The market began crashing roughly two weeks after Burr’s sale as the coronavirus outbreak reached pandemic levels, but has since soared well above its pre-pandemic heights.
The Justice Department also investigated Burr’s stock sales, but declined to press charges.
Burr, who will retire after term ends in 2022, defended his stock sales in March 2020 after ProPublica first reported on the disclosure. The senator told the Senate Ethics Committee that he based his decision on CNBC coverage of COVID-19’s early impact in Asia.
A Senate spokesperson for Burr did not respond to a Wednesday request for comment.