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Silicon Valley Bank Chief Executive Officer Greg Becker sold $3.6 million of the company’s stock under a trading plan less than two weeks before the company disclosed the massive 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 in the parent company. SVB Financial Group, according to regulatory filings. He filed the plan allowing him to sell the shares on January 26.
On Friday, Silicon Valley Bank failed after a week of turmoil caused by a letter the company sent to shareholders that it would try to raise more than $2 billion in capital after losses. The announcement sent the company’s shares tumbling, though Becker urged clients to remain calm.
Neither Becker nor SVB immediately responded to questions about the sale of his share, and whether the CEO was aware of the bank’s plans for trying to raise capital when he filed the trading plan. The sale was made through a revocable trust controlled by Becker, the filings show.
Prepared Plans
There is nothing illegal about corporate business plans like the one used by Becker. Plans were put in place by the Securities and Exchange Commission in 2000 to prevent the possibility of insider trading. The idea is to avoid malfeasance by limiting sales to predetermined dates where an executive can sell shares, and the timing can be purely coincidental.
However, critics say that the prearranged share-sale planscalled 10b5-1 plans, have significant loopholes, including that they lack mandatory cooling-off periods.
“While Becker did not expect the bank to run on January 26 when he adopted the plan, the capital increase is material,” said Dan Taylor, a professor at the University of Pennsylvania’s Wharton School who studies corporate trading disclosures. “If they were talking for a capital increase at the time the plan was adopted, that would be very problematic.”
In December, the SEC concluded the new rules which will mandate at least a 90-day cooling-off period for most executive trading plans, meaning they cannot make trades on a new schedule for three months after they are held.
Executives are required to begin complying with the rules on April 1.
-With help from Tom Schoenberg and Ed Ludlow.
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