Alarm raised over ‘suspicious trading’ in Navient shares
A congressional panel has found signs of “suspicious trading” in the stock of the nation’s largest student loan servicing company before the firm was hit with a federal lawsuit that might have sent the shares plunging, according to Wednesday proceedings at a House hearing.
Rep. Patrick McHenry, R-N.C., the vice chairman of the House Financial Services Committee, made the disclosure during a politically-charged session on the performance of the Consumer Finance Protection Bureau. Amid renewed Republican criticism of the regulator, McHenry focused on the lawsuit the CFPB announced Jan. 18 against Navient (NAVI), the Delaware-based student loan servicing giant.
“Unfortunately, committee staff has learned of suspicious trading activity for the Navient Corporation the morning before the announcement of CFPB’s enforcement action,” McHenry said. The disclosure came after McHenry asked CFPB Director Richard Cordray if he knew of “any confidential leaks” that “led to insider trading.”
“I’m not. And if there is something, I’d be very concerned about it,” replied Cordray, who similarly said he didn’t know if anyone at the CFPB had been investigated for insider trading.
McHenry said “it’s unclear at this point” whether the purported suspicious trading could have involved transactions by CFPB staffers or by outside traders tipped off by a leak about the impending Navient lawsuit.
Cordray pledged the CFPB’s cooperation if the Securities and Exchange Commission or the U.S. Department of Justice were to investigate the issue.
McHenry spokesman Jeff Butler referred questions to senior committee staffers. Sarah Rozier, the panel’s communications director, said in a statement: “Our committee is investigating the suspicious trading activity and, as such, we have a responsibility to seek all information relevant to such investigation — which includes asking the head of the agency that brought the enforcement action if he has any knowledge on the matter.”
The SEC and the Department of Justice declined to comment, as did Navient.
Navient has denied the CFPB allegations, and last week filed a motion to dismiss the lawsuit.