SVB chief sold $3.6 million worth of shares days before bank collapse

(Bloomberg) — Silicon Valley Bank CEO Greg Becker sold $3.6 million worth of company shares under a trading plan less than two weeks before the firm reported the massive losses that led to its collapse.

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The sale of 12,451 shares on February 27 was the first time Becker sold shares in parent company SVB Financial Group in more than a year, according to regulatory filings. He filed a plan that allowed him to sell shares on January 26th.

A Silicon Valley bank collapsed on Friday after a week of turmoil sparked by a letter the firm sent to shareholders saying it would try to raise more than $2 billion in capital after it suffered losses. The announcement caused the company’s stock to drop despite Becker urging customers to remain calm.

Neither Becker nor SVB immediately responded to questions about the sale of his shares and whether the CEO was aware of the bank’s plans for a capital raise attempt when he filed the trading plan. According to the documents, the sales were made through a revocable trust controlled by Becker.

pre-prepared plans

There is nothing illegal about corporate trading plans like the one used by Becker. These plans were developed by the Securities and Exchange Commission in 2000 to prevent the possibility of insider trading. The idea is to avoid abuse by limiting sales to predetermined dates when an executive can sell shares, and the time could just be random.

However, critics say there are significant loopholes in the pre-arranged share sale plans, called 10b5-1 plans, including the absence of mandatory cooldown periods.

“While Becker may not have foreseen the January 26 bank run when he enacted the plan, the capital increase is substantial,” said Dan Taylor, a University of Pennsylvania Wharton School professor who studies corporate trading disclosure. “If they were discussing a capital increase at the time the plan was passed, that’s very problematic.”

In December, the Securities and Exchange Commission (SEC) finalized new rules that provide at least a 90-day cooldown period for most execution trading plans, meaning they cannot trade on the new schedule for up to three months after their entry into force.

Managers are required to begin complying with these rules from April 1.

–With assistance from Tom Schoenberg and Ed Ludlow.

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