Senator Richard Burr, R-N.C., the chairman of the Senate Intelligence Committee, dumped around $1.7 million in stock on February 13th. A few Senators conducted similar selloffs. These senators profited by avoiding a mass market downturn in March resulting from the coronavirus outbreak in the United States.
Given Burr’s position as head of the Senate Intelligence Committee, Burr was receiving daily briefings on the COVID-19 coronavirus all while telling the public the virus posed little threat to markets and the country. Despite Burr’s double-face, Burr’s sell-off itself is likely neither unethical nor illegal.
What is Insider Trading?
Senator Burr is innocent under traditional insider trading laws. To qualify as insider trading, the securities transaction must be conducted in reliance on or with knowledge of non-public information. Burr did not trade on non-public information when he sold his stocks. Though many United States Republicans had been declaring coronavirus a non-threat, the insider trading test relies on whether the trading public or reasonable investors — not the general public — knew the information. Indeed, the trading public absolutely knew that the coronavirus posed a potential threat to financial markets and the United States. There are countless articles published in late January from reputable sources about how the spread of coronavirus will lead to a recession. Burr’s transactions occurred three weeks after these articles started coming out and a month after the world already knew about the coronavirus’s extremely contagious characteristics. It would be nearly impossible to prove that Burr did not trade on the public information already circulating about the dangers of coronavirus.
Given that Burr’s transactions occurred in February and the coronavirus did not seriously impact the United States’ economy until March, Burr was not trading on advanced or privileged knowledge that coronavirus will hurt the United States economy. Burr had no way of knowing the actual impact of the coronavirus. Instead, Burr likely sold his stocks based on his knowledge of a likelihood that coronavirus would impact the United States’ economy. Since the trading public also knew the coronavirus would likely impact the United States’ economy from as early as late January, Burr did…