On February 7, 2020, there were 34,876 confirmed cases of Covid-19 worldwide, but none in the United States. On that day, Fox News published a reassuring opinion piece co-authored by Republican Senator Richard Burr, arguing that the US is prepared to face any outbreak. Around February 13, a couple of days before the first confirmed cases in the US were discovered and before the stock markets began to plunge, Burr sold hundreds of thousands of dollars’ worth of stocks, many of which were in the hotel industry. Senator Burr’s stock sale was not public at the time; the sales were first reported by ProPublica only a month later.
We do not yet know whether Senator Burr’s decision to dump his stocks was based on confidential government information to which he had special access. On the one hand, new information on the Covid-19 pandemic was coming out every day, and perhaps Senator Burr was simply one of many investors who changed their minds regarding the outbreak and were lucky to exit the market in time. On the other hand, Senator Burr is the Chair of the Senate Intelligence Committee, which was receiving regular briefings on the coronavirus situation, so the suspicions towards him are understandable. (It also didn’t help matters that a few weeks after the publication of his op-ed Senator Burr told wealthy donors in a closed-door meeting that the Covid-19 outbreak “is probably more akin to the 1918 pandemic,” but never revised his previous public reassurances.) Whether justifiably or not, Senator Burr was harshly criticized (including on this blog), with many calling for his resignation, and he has been sued for insider trading by a shareholder of one of the companies whose stocks he dumped. In addition to the criticism leveled at Senator Burr, several commentaries, including Cristina’s post on this blog, have argued that this incident demonstrates the need to amend the 2012 STOCK Act to impose stricter limitations on the freedom of senior US government officials, including Members of Congress, to trade in stocks.
My perspective is somewhat different. While I acknowledge the legitimate concerns that motivated calls to strengthen prohibitions on stock trading by government officials, in my view regulation should be more focused on ensuring the transparency of those trades, rather than on further limiting or blocking stock trading.