Chief Executive Officer Silicon Valley Bank Greg Becker sold $3.6 million in company shares in a trading plan less than two weeks before the firm disclosed extensive losses that led to 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 parent company SVB Financial Group, according to a regulatory filing. He filed a plan allowing him to sell the shares on January 26.
On Friday, Silicon Valley Bank failed after a week of turmoil fueled by a letter the company sent to shareholders saying it would try to raise more than $2 billion in capital after losses. The announcement sent shares in the company tumbling, although Becker urged clients to remain calm.
Neither Becker nor SVB immediately responded to questions about the share sale, and whether the CEO was aware of the bank’s plans to raise capital when it filed the trading plan. The sale was made through a revocable trust controlled by Becker, the filing shows.
A plan that has been drawn up
There is nothing illegal about the company’s trading plan as used by Becker. The plan was created by the Securities and Exchange Commission in 2000 to prevent possible insider trading. The idea is to avoid malfeasance by limiting the sale to a predetermined date on which the executive can sell the stock, and the timing is purely coincidental.
However, critics say the regulated stock sale plan, called a 10b5-1 plan, has significant loopholes, including the lack of a mandatory cooling-off period.
“While Becker may not have anticipated the bank run on January 26 when he adopted the plan, raising material capital,” said Dan Taylor, a professor at the University of Pennsylvania’s Wharton School who studied corporate disclosures. “If they’re discussing a capital increase when the plan is adopted, that’s a big problem.”
In December, the SEC finalized new rules that would mandate at least a 90-day cooling-off period for most executives’ trading plans, meaning they could not make trades on the new schedule for three months after being arrested.
Executives must start enforcing the rules on April 1.
-With assistance from Tom Schoenberg and Ed Ludlow.
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