Who is being investigated for insider trading

The sales included tens of thousands of dollars in stock in the hospitality industry, which was particularly hard hit in coronavirus outbreak. A Justice Department investigation into the trades was launched in March last year, soon after questionably timed trades by Burr and other lawmakers became publicly known. The Justice Department investigation -- which was being done in coordination with the SEC -- was closed in January, right before the inauguration. The new filings in the SEC dispute are the first public indication that an investigation into Burr is still active.

The new filings outline a series of calls, after Burr allegedly directed the sale, between the senator, his sister Brooke Burr and her husband, Gerald Fauth. Later that day, Fauth directed a broker to sell stocks in his wife's account, the filing said. That fueled accusations that the members of Congress were acting on inside information gained through their official duties to benefit financially, which is illegal under a law known as the STOCK Act.

The department cleared him of wrongdoing almost a year later — on Jan. But the SEC continued to investigate Burr, according to court documents filed in the Southern District of New York that were first made public last week.

The agency enforces federal securities law. Attorneys for Burr as well as for Gerald Fauth, who is the brother of Burr's wife, did not immediately respond to requests for comment. Burr has previously denied any wrongdoing.

The filings stem from a case brought by the SEC to force Fauth to comply with a subpoena. To bolster their case, SEC attorneys released a timeline of phone calls from Feb. It was roughly one week before the stock market went into a tailspin. At the time Burr had "material nonpublic information concerning Covid and its potential impact on the U. Burr allegedly called his stockbroker the morning of Feb. 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.

The STOCK Act also bans members of Congress from using information gained through their office to enrich themselves in financial markets. Burr, who will retire after term ends in , defended his stock sales in March after ProPublica first reported on the disclosure. Contrary to common belief, insider trading is not always illegal. Insider trading is legal when corporate insiders—such as a company's directors, officers, and employees—buy or sell shares in their company in accordance with securities laws and regulations.

Such legal insider trading must be filed with the U. The version of insider trading that makes the headlines, however, is the illegal trading made by someone who possesses material and nonpublic information. The SEC vigorously pursues such insider trading cases in order to ensure that the capital market is a level playing field where no one has an unfair advantage. Otherwise, rampant insider trading can erode public confidence in the market and impede its functioning.

The SEC's successful cases against high-profile individuals like Martha Stewart and former McKinsey global head Rajat Gupta prove that no one is above the law if they undertake such illegal activity. The SEC defines illegal insider trading as "buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security.

What is material information anyway? This could include a vast array of items, including financial results that differ from current expectations, business developments , security-related items such as an increase or decrease in dividend, share split, or buyback ; acquisition or divestiture ; winning or losing a major contract or customer.

Over the years, the SEC has brought insider-trading cases against hundreds of parties, including:. They noted that since direct evidence of insider trading is rare, the evidence is almost completely circumstantial.

The SEC tracks insider trading in a number of ways:. Such surveillance activity is helped by the fact that most insider trades are conducted with the intention of "hitting it out of the ballpark. Such huge, anomalous trades are usually flagged as suspicious and may trigger an SEC investigation.

The easiest way for someone to capitalize on inside information is through the use of OTM options since these deliver the most bang for the buck. Would it be any surprise if they complained about the suspicious nature of this trade, which has saddled them with a gigantic loss to the SEC?

However, because insider trading is typically done on a one-off basis by a single insider who may either trade directly or tip someone else, whistleblowers seem to be more successful in unearthing widespread fraud rather than isolated insider trading abuses.

Once the SEC has the basic facts on a possible securities violation, its Division of Enforcement launches a full investigation that is conducted privately.