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SEC Urged by AFL-CIO to Review Aug 31 Trade of Navient Stock


An appeal has been made by the AFL-CIO to the Securities and Exchange Commission (SEC), to look for possible insider trading in a particular transaction. This transaction involved trading of Navient Corporation NAVI shares just before the U.S. Department of Education’s resolve to end all decision-sharing agreements with the Consumer Financial Protection Bureau (“CFPB”) was made public.

On Aug 31, 2017, the U.S. Department of Education had sent a letter to the CFPB, informing them that the Education Department would no longer provide them with any information that they needed to supervise student loan companies.

This announcement was beneficial for all student loan contractors, especially Navient, which has continuously been the CFPB’s target for abusive student lending practices. The CFPB had filed a lawsuit against the company in January for “cheating many struggling borrowers out of their rights to lower repayments, which caused them to pay much more than they had to for their loans.”

Once the decision-sharing bond between the Education Department and the CFPB is cut, it could put this lawsuit in risk. This in turn would benefit Navient in the future.

The Congress made the news public only on Sep 1. However, in the hours between the CFPB being informed about the policy change and the Congress making the news public, nearly 900,000 shares of Navient were purchased.

The letter sent by the labor union to the SEC mentions that the trades were carried out in three large blocks. The 900,000 shares that were purchased by some unknown investors at or after the close of the markets on Aug 31 represented nearly 24% of the day’s total trading volume. Per the AFL-CIO, each share was purchased at $13.20. Once the trading was complete, just before the public disclosure of the news, shares of the company had risen more than 4%.

The AFL-CIO said in the letter, “News that the U.S. Department of Education had terminated its [memorandum of understanding] with the CFPB should have been considered material, non-public information until the House Committee on Education and the Workforce issued its press release on Sept. 1.”

However, the SEC has declined to make any comments regarding the appeal made by the AFL-CIO, while Patricia Christel, a spokeswoman for Navient said that the company did not have any prior information about the policy shift before it was made public.

Shares of the company have lost 11.6% over the past year compared with 20% growth for the industry it belongs to.

Currently, the stock carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the finance space are The Toronto-Dominion Bank TD, The PNC Financial Services Group, Inc. PNC and State Street Corporation STT.

Toronto-Dominion Bank has witnessed an upward earnings estimate revision of 11.2% for the current fiscal year over the past 60 days. Its share price has increased 30.1% in the past year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PNC Financial’s shares have gained more than 50% in a year’s time. Its Zacks Consensus Estimate for current-year earnings has been marginally revised upward in the last 60 days. It carries a Zacks Rank #2 (Buy).

State Street also carries a Zacks Rank of 2. Its Zacks Consensus Estimate for current-year earnings has been revised nearly 1% upward in the last 60 days and its shares have gained 40.4% in a year’s time.

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