SVB boss sold $3.6m worth of shares days before bank collapse

Silicon Valley Bank chief executive officer Greg Becker sold $3.6 million in company stock under a trading plan less than two weeks before the company announced sweeping losses that led to its failure.

The Feb. 27 sale of 12,451 shares was the first time Becker had sold shares in parent company SVB Financial Group in more than a year, official filings show. He submitted the plan, which allowed him to sell the shares on January 26th.

On Friday, the Silicon Valley bank failed after a week of turmoil fueled by a letter the company sent to shareholders in which it would seek to raise more than $2 billion in capital after suffering losses. The announcement sent the company’s shares plummeting, although Becker urged customers to remain 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-raising attempt when he submitted the trading plan. The sales were made through a revocable trust controlled by Becker, the filing shows.

Prepared Plans

Commercial schemes by companies like Becker’s are not illegal. The plans were drawn up by the Securities and Exchange Commission in 2000 to eliminate the possibility of insider trading. The idea is to avoid wrongdoing by limiting sales to pre-determined dates when an executive can sell shares, and the timing could have just been coincidental.

But critics say the pre-agreed share sale plans, known as 10b5-1 plans, have significant loopholes, including a lack of mandatory cooling off periods.

“While Becker may not have anticipated the Jan. 26 bank run when he adopted the plan, raising capital is essential,” said Dan Taylor, a professor at the University of Pennsylvania’s Wharton School, who studies corporate trading disclosures. “If they were discussing a capital raise at the time the plan was approved, that’s highly problematic.”

In December, the SEC finalized new rules that would require most executive trading plans to have a cooling off period of at least 90 days, meaning they would not be able to trade on a new schedule three months after they came into effect.

Managers must comply with these rules from April 1st.