Tuesday, October 20, 2020

Warren urges SEC, CFTC to scrutinize Trump advisors’ private gloomy COVID outlook ahead of trades

By Amanda Maine, J.D.

In a letter to the chairmen of the SEC and the CFTC, Sen Elizabeth Warren (D-Mass) called on the agencies to investigate reports that while the Trump Administration publicly painted the COVID-19 pandemic in optimistic terms, top Trump advisors were privately warning of negative consequences to Republican donors and members of the board of the Hoover Institution, a conservative think tank. The letter follows a recent article in the New York Times, which reported that in February, while the president was proclaiming COVID-19 to be under control, Trump advisors recommended privately that investors take short positions in the stocks of certain companies in anticipation that the stock prices would fall.

Possible insider trading. Calling the report "an appalling abdication of duty" if true, Warren noted that privately informing donors and conservative allies that conditions were much more dire by using likely nonpublic information appears to be a "textbook case" of insider trading under the laws of both the SEC and the CFTC. Moreover, Warren cited several other reported incidents—including the Trump administration’s decision to award Kodak an over $750 million loan for pharmaceutical production, suspicious trading related to defense industry stocks or commodities in advance of the administration’s attacks in Iran, and Navient Corporation stock trades in advance of Department of Education announcements—as evidence of a pattern of possible insider trading that merits intense scrutiny by the two agencies.

Questions. Warren is seeking prompt answers of the following questions from the chairmen:
  • Which administration officials provided material nonpublic information about the economic and public health risks from the coronavirus to investors, Hoover Institution board directors, and other insiders?
  • How did this information differ in content from the information that the president and other administration officials were providing to the public?
  • Which individuals received this information and to whom did they provide it?
  • Were any trades of securities, swaps, futures, or commodities made by individuals who had access to this nonpublic information, and if so, did these trades represent a violation of insider trading law?
In a press statement accompanying the letter, Sen Warren admonished, "Given my concerns about this betrayal of the public by Trump administration officials, and about pandemic-related profiteering by well-connected Republican donors and investors, I ask that [the chairmen] investigate this matter."