What Legal Protections Exist to Prevent Senators From Trading on Non-Public Information?

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Senator Richard Burr stepped down from his role as chair of the Senate Intelligence Committee as some stock trades he made ahead of the coronavirus economic downturn come under investigation. 

Burr has been under scrutiny for a few months after being secretly recorded warning constituents of the threats of the coronavirus in February. 

Several of the stocks sold ahead of the coronavirus market downturn involved hotels. 

Rebecca Rose Woodland, litigator and legal analyst, joined TheStreet in March when the story first broke to discuss what legal protections exist to prevent senators from trading on non-public information.

Watch the full video above for more.

Video Transcript:

Katherine Ross:
Senators Richard Burr and Kelly Loeffler reportedly sold stocks following a briefing on the Coronavirus. So what does that mean? Joining me to break it down is Rebecca Rose Woodland, a litigator and legal analyst.

Katherine Ross:
What legal protections are in place to protect senators from trading on nonpublic information, Rebecca?

Rebecca Rose Woodland:
So there's actually a huge act. It's called the STOCK Act. It is Stop Trading On Congressional Knowledge. It was signed in 2012 after an expose by 60 Minutes had revealed that Congresspeople were trading on information. They traced some back to the 2008 crisis, that there were somewhat laypeople would call, insider trading being done by Congresspeople. And that was now prohibited, absolutely.

Rebecca Rose Woodland:
If you have knowledge that you've obtained in your Congressional position that is private, or not yet fully public knowledge, you cannot trade, you cannot buy or sell stock based on that knowledge if you're a Congressman or woman or an aid or working for someone in the Congress that would have been briefed or prepped.

Katherine Ross:
Okay, let's say that there's a case against these two senators, what would that case look like? And how would it proceed?

Rebecca Rose Woodland:
Well, actually aside from those two, there are other senators as well that it's slowly being revealed, because there's a 45-day window in terms of having to advise and having to reveal this information. So there are the two main, Barr and Loafer and also some secondaries and some aids that it looks like possibly could have traded. Now all of them, all of them have denied any insider trading.

Rebecca Rose Woodland:
A case would look like an investigation, either prosecutorial or an ethics investigation, into how, when, and why these trades were made. It would be very difficult to, most likely difficult to prove unless you have phone calls, transcripts of conversations, or emails that specifically relate to the epidemic, the onslaught of the epidemic, and the private knowledge, so you'd have to dictate or differentiate between private and public knowledge, that the Congresspeople would have had at that time. And then that they acted upon that knowledge by contacting their investment people or contacting your traders, however, they work their portfolios, and then actually effectuate trades, in which they acted specifically on that knowledge.

Katherine Ross:
Thank you for joining us today, Rebecca, and for more on the markets, please head on over to thestreet.com.