A series of well-timed trades in shares of student loan giant Navient Corp. before the Labor Day weekend, following which a critical Trump administration policy shift came to light, spurred the AFL-CIO to ask regulators to review what the labor federation called potential insider trading.

The organization on Tuesday urged the U.S. Securities and Exchange Commission “to examine the trading in Navient’s common stock on Aug. 31,” according to a copy of the request obtained by Bloomberg News. The trades occurred before a letter to the Consumer Financial Protection Bureau revealing the Education Department rule change was publicly released.

The CFPB, created in the aftermath of the financial crisis, had pledged to supervise student loan contractors and develop new rules governing their conduct. Richard Cordray, the CFPB’s director, has been the frequent target of Republican ire, with his agency targeted by some in Congress for elimination. In January, the regulator sued Navient, accusing it of “systematically” cheating student debtors by taking shortcuts to minimize its own costs. Navient has consistently denied wrongdoing.

In an Aug. 31 letter to the CFPB, the Department of Education rebuked the agency for supposed overreach, saying that it would no longer provide the regulator with information necessary to police federal student debt. Only the department has the authority to supervise companies that collect on federal student debt, agency officials Kathleen Smith and Wayne Johnson wrote.

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

The letter from the Education Department was dated Aug. 31, a Thursday before the Labor Day holiday weekend, but wasn’t received by the CFPB until around 3:50 p.m. on Friday, Sept. 1, according to the 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 public by Congress late Friday, Sept. 1.

In response to the AFL-CIO letter, the Education Department declined to immediately comment while SEC spokesman Ryan White declined to comment. Navient spokeswoman Patricia Christel said the company didn’t know about the Education Department decision before its public release.

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

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

The labor federation cites both the traditional federal laws proscribing insider trading, and a separate statute, the 2012 law known as the Stop Trading on Congressional Knowledge Act. In some instances, Washington insiders have been convicted of abusing their public positions for personal gain. In 2012, former U.S. Food and Drug Administration chemist Cheng Yi Liang admitted buying and selling stock based on confidential information to rack up more than $3.8 million in gains and avoided losses during a five year period. A judge sentenced him to five years in prison.

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

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SEC Asked to Probe Trades of Student Loan Firm Navient

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