Silicon Valley Bank CEO Greg Becker sold $3.6 million of company stock as part of a trading plan less than two weeks before the company disclosed steep losses that led to its failure.
The sale of 12,451 shares on February 27 was the first time in more than a year that Becker had sold shares of the parent company SVB Financial Group, according to regulatory filings. He filed the plan that allowed him to sell the shares on January 26.
Silicon Valley Bank filed for bankruptcy on Friday after a week of tumult fueled by a letter the company sent to shareholders saying it would try to raise more than $2 billion in capital after suffering losses. The announcement sent the company’s shares plummeting, even as Becker urged customers to stay calm.
Neither Becker nor SVB immediately responded to questions about his stock sale and whether the CEO was aware of the bank’s plans for the capital raise attempt when he filed the plan. negotiation. The sales were made through a revocable trust controlled by Becker, according to filings.
Pre-established packages
There is nothing illegal about corporate business plans like the one used by Becker. The schemes were put in place by the Securities and Exchange Commission in 2000 to thwart the possibility of insider trading. The idea is to prevent malfeasance by limiting sales to predetermined dates when an executive can sell stock, and the timing might just have been coincidental.
However, critics say the pre-established stock sale planscalled 10b5-1 plans, have significant shortcomings, including the lack of mandatory cooling-off periods.
“While Becker may not have anticipated the Jan. 26 bank run when he adopted the plan, the capital raise is significant,” said Dan Taylor, a professor at the Wharton School at the University of Pennsylvania which investigates corporate business disclosures. “If they were in discussions for a capital increase at the time the plan was adopted, it is very problematic.”
In December, the SEC new rules finalized it would impose a cooling-off period of at least 90 days on most executives’ trading plans, meaning they can’t trade on a new schedule for three months after they take hold.
Leaders are required to begin complying with these rules on April 1.
–With help from Tom Schoenberg and Ed Ludlow.
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