CEO Greg Becker of Silicon Valley Bank sold $3.6 million of company shares under a trading strategy less than two weeks before the bank announced massive losses that contributed to its demise.
According to regulatory documents, Becker sold 12,451 shares of parent firm SVB Financial Group on Feb. 27 for the first time in more than a year. On January 26, he submitted the plan that permitted him to sell the shares.
Silicon Valley Bank went bankrupt on Friday. This was the end of a week of trouble that started when the company sent a letter to shareholders saying it wanted to raise more than $2 billion in capital while taking losses.The statement sent the company’s stock plummeting, despite Becker’s advice to customers to remain calm.
Neither Becker nor SVB responded promptly to concerns regarding his share sale or if the CEO was aware of the bank’s capital-raising ambitions when he submitted the trading plan. According to court documents, the transactions were done via a revocable trust owned by Becker.
Corporate trading programs like the one Becker used are not unlawful. The Securities and Exchange Commission established the measures in 2000 to prevent insider trading. The goal is to prevent misconduct by restricting sales to preset days on which an executive may sell shares, and the timing might just be a coincidence.
Nevertheless, opponents claim that the prepared share-sale arrangements, known as 10b5-1 plans, contain severe flaws, such as the absence of statutory cooling-off periods.
“Although Becker may not have expected the bank run on January 26 when he endorsed the plan, the capital raising is significant,” said Dan Taylor, a professor of corporate trading disclosures at the University of Pennsylvania’s Wharton School. “It’s quite troubling if they were discussing a capital raising at the time the plan was enacted.”
The SEC announced new regulations in December that would require at least a 90-day cooling-off period for most executive trading plans, which means they can’t conduct transactions on a new timetable for three months after the regulations take effect.
CEOs must begin complying with the standards on April 1.