CEO Greg Becker of Silicon Valley Bank sold $3.6 million of company stock under a trading strategy less than two weeks before the firm announced massive losses that contributed to its failure.
According to regulatory documents, Becker sold 12,451 shares in parent firm SVB Financial Group on Feb. 27 for the first time in more than a year. On January 26, he filed the plan that allowed him to sell the shares.
Silicon Valley Bank folded on Friday, capping up a week of turmoil spurred by the firm’s letter to shareholders announcing its intention to raise more than $2 billion in capital while incurring losses. The statement sent the company’s stock plummeting, despite Becker’s advice to clients to remain calm.
Neither Becker nor SVB reacted promptly to concerns regarding his share sale or if the CEO was aware of the bank’s capital-raising ambitions when he filed the trading plan. According to court documents, the sales were made through a revocable trust owned by Becker.
Corporate trading programs like the one CEO Becker utilized are not unlawful
Corporate trading programs like the one CEO Becker utilized are not unlawful. The Securities and Exchange Commission established the measures in 2000 to prevent insider trading. The goal is to avoid misconduct by restricting sales to preset days on which an executive can sell shares, and the timing could be a coincidence.
However, critics claim that the prepared share-sale arrangements, known as 10b5-1 plans, contain severe flaws, such as the lack of statutory cooling-off periods.
“While CEO Becker may not have anticipated the bank run on Jan. 26 when he adopted the plan, the capital raise is material,” said Dan Taylor, a professor at the University of Pennsylvania’s Wharton School who studies corporate trading disclosures. “If they were in discussion for a capital raise at the time the plan was adopted, that is highly problematic.”
The SEC announced new rules 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 they take effect. CEO must begin complying with the standards on April 1.