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Portfolio > Investment VIPs

Senators’ Stock Sales After Virus Briefings Spark Advisor Debate

By Janet Levaux

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As advisors work in overdrive to help clients and keep up with the latest market, economic and tax-related news tied to the coronavirus, they are also taking to social media over news that four senators with exclusive information on COVID-19 made some moves that helped shield their portfolios from the recent turmoil. 

Jeff Levine, a CPA, CFP and director of advanced planning at Buckingham Wealth Partners,  started the discussion by asking: “Fishy to anyone else that MULTIPLE lawmakers told the public everything was OK + not to worry about #COVID19, at the SAME TIME they were: 1) Receiving classified briefings stating otherwise 2)  Dumping stock. Exhibit A: Exhibit B.”

Sen. Kelly Loeffler, R-Ga., and three other senators are taking heat for selling and buying stocks after they received sensitive briefings in late January about the potential impact of the coronavirus. Loeffler and her husband, NYSE Chairman Jeffrey Sprecher, moved to sell stocks like AutoZone, Resideo Technologies and Ross Stores. 

At the same time, the Loefflers made investments of $100,000 to $250,000 into Citrix, a teleworking software firm, and in Oracle, according to their disclosures. 

Meanwhile, Sen. Richard Burr, R-N.C., and his wife sold about $1.7 million of holdings on Feb. 13. Others senators making recent stock sales before the market downturn include Republicans David Perdue of Georgia and James Inhofe of Oklahoma; the husband of Sen. Dianne Feinstein, D.-Calif., did so, as well.

What to Do?

Several investors and advisors suggested that the senators be prosecuted or kicked out of the Senate. “Unbelievable and should be prosecuted if true,” said Brett Rice in a tweet.

But Paul Miguel, CFP, says not so fast: “Because she bought Citrix the day AFTER earnings when it was up 7%? Lets wait to see.”

Miguel explained further: “I agree keeping her mouth shut on the virus looks terrible, I’m saying I don’t understand how she broke criminal insider trading laws for buying and selling common stocks after earnings news. Many Advisors & CNBC were recommending portfolio shifts on global virus news at time also.”

According to Loeffler, who defended the stock moves on Twitter late Thursday, “This is a ridiculous and baseless attack. I do not make investment decisions for my portfolio. Investment decisions are made by multiple third-party advisors without my or my husband’s knowledge or involvement.”

She added: “As confirmed in the periodic transaction report to Senate Ethics, I was informed of these purchases and sales on Feb. 16, 2020 — three weeks after they were made.” 

That approach makes sense to Kyle Moore, CFP: “She claims she has advisors with discretion and neither she nor her husband are involved in those decisions. Doesn’t that seem plausible? That was my initial thought when I read it and she confirmed that.”

Attorneys also suggest that unless there’s proof that she directed an investment professional to make certain transactions, the stock moves could be fully legal. 

“It’s far too soon to rush to judgement,” said Brian Carlis, an attorney with Stark & Stark. “There could be a plausible explanation, especially if the assets were placed in a blind trust,” he said.

Disclosures made by Feinstein include those tied to a blind trust, while those of the other senators — including Loeffler and Burr — do not. (The Senate’s disclosure website includes blind trust and other documents.)

“And if a discretionary money manager is involved, it’s entirely possible and even likely that the individual had no knowledge of the transactions before they took place,” Carlis said. “The mere fact that transactions occurred is not enough for anyone to pass judgement on for possible wrongdoing, but I appreciate that people are suspicious and/or skeptical.”

Future Reforms

In light of the fact that several senators appear to have avoided stock losses that other investors did not, some advisors are suggesting it’s time for changes to stock trading rules for politicians.

“Why are these elected ppl not held to the simple rule of indexes only while in office? No direct investments due to conflict of interest is so obvious and already in place for the CNBC hosts. They are public servants, indexing is just fine,” said advisor Jeff Kirk on Twitter.

Patrick Ortman, a financial planner, urged a wider perspective on the matter. 

“I don’t care that they cashed out,” he tweeted. “I do care that they didn’t do more to prepare the public. But then again, if the briefing made it obvious a catastrophe was around the corner, why did no other attendee scream from the rooftops?”

— Related on ThinkAdvisor:

Janet Levaux

@Think_JanetL

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