A series of well-timed trades in shares of student loan giant Navient Corp. before theLabor Day weekend, following which a critical Trump administrationpolicy shift came to light, spurred the AFL-CIO to ask regulatorsto review what the labor federation called potential insidertrading.

The organization on Tuesday urged the U.S. Securities andExchange Commission “to examine the trading in Navient’scommon stock on Aug. 31,” according to a copy of the requestobtained by Bloomberg News. The trades occurred before aletter to the Consumer Financial Protection Bureau revealingthe Education Department rule change was publicly released.

The CFPB, created in the aftermath of the financialcrisis, had pledged to supervise student loan contractors anddevelop new rules governing their conduct. Richard Cordray, theCFPB’s director, has been the frequent target of Republican ire,with his agency targeted by some in Congress forelimination. In January, the regulator sued Navient, accusingit of “systematically” cheating student debtors by taking shortcutsto minimize its own costs. Navient has consistently deniedwrongdoing.

In an Aug. 31 letter to the CFPB, the Department ofEducation rebuked the agency for supposed overreach, saying that itwould no longer provide the regulator with informationnecessary to police federal student debt. Only the department hasthe authority to supervise companies that collect on federalstudent debt, agency officials Kathleen Smith and Wayne Johnsonwrote.

The decision by the Trump administration to stiff-arm theCFPB was clearly good news for student loan contractors suchas Navient, which had come under its scrutiny. Moreover,the cut off of data could jeopardize the prosecution of theagency’s lawsuit against the loan company. Analysts atWashington-based Compass Point Research & Trading, reacting tothe letter, upgraded Navient to a “buy” on Tuesday, Sept.5, telling clients the letter was an “unambiguoussignal” that companies such as Navient would face a “far lessonerous” regulatory environment.

The letter from the Education Department was dated Aug. 31, aThursday before the Labor Day holiday weekend, but wasn’t receivedby the CFPB until around 3:50 p.m. on Friday, Sept. 1, according tothe agency.

Beginning late in the trading day on Thursday, Aug. 31, however,large trades had already begun to send Navient shares surging.The letter from the Education Department was eventually made publicby Congress late Friday, Sept. 1.

In response to the AFL-CIO letter, the Education Departmentdeclined to immediately comment while SEC spokesman Ryan Whitedeclined to comment. Navient spokeswoman Patricia Christelsaid the company didn’t know about the Education Departmentdecision before its public release.

According to the AFL-CIO, an unknown number of investorsmade three big purchases of Navient stock at the price of $13.20per share late on Aug. 31. This amounted to 872,394 shares, equalto 24 percent of trading volume that day, according to theletter.

The next morning, a few more big purchases took place. By thetime Representative Virginia Foxx, a North Carolina Republicanand chair of the House education committee, announced theEducation Department’s policy shift around 5 p.m., Navient stockhad risen to $13.75 per share, a more than 4 percent jump from themarket close on Aug. 31.In its letter, the AFL-CIO said that “newsthat the U.S. Department of Education had terminated its[memorandum of understanding] with the CFPB should have beenconsidered material, nonpublic information until the HouseCommittee on Education and theWorkforce issued its press release onSeptember 1, 2017.” Kelley McNabb, a spokeswoman for Foxx,said Tuesday the congresswoman's committee “had no knowledge ofthis policy change until the afternoon of Sept. 1.”

The labor federation cites both the traditional federal lawsproscribing insider trading, and a separate statute, the 2012law known as the Stop Trading on Congressional KnowledgeAct. In some instances, Washington insiders have beenconvicted of abusing their public positions for personal gain. In2012, former U.S. Food and Drug Administration chemist Cheng YiLiang admitted buying and selling stock based on confidentialinformation to rack up more than $3.8 million in gains and avoidedlosses during a five year period. A judge sentenced him to fiveyears in prison.

In the case of Navient, “the trading activity is unusual,” saidHeather Slavkin Corzo, director of the AFL-CIO Office ofInvestment, which helps oversee union pension funds that ownNavient stock. “Whether it’s folks on Wall Street or in Washington,insider trading undermines the fairness of our financialmarkets.”

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