Last week, Silicon Valley Bank (SVB) said it would be closing its doors, which sent shockwaves across the banking industry and forced the top US authorities, including the Fed and the FDIC, to take action.
Even while the Fed successfully prevented the contagion from extending further, recent information on insider stock sales has brought up new concerns and issues.
SVB Cease Operations
According to the available data, Silicon Valley Bank CEO Greg Becker sold stock for $30 million over the past two years.
Interestingly, Becker sold $3.6 million worth of SIVB stocks on February 27, just two days before the bank announced a significant loss in operations.
The SIVB stock began to suffer losses almost immediately after the data were released, and it completely collapsed within a week.
According to information provided by Smart Insider, Becker has been selling off his stock over the past two years. He generated a total profit of $29.5 million by selling the SIVB shares at varying prices ranging from $287 to $598 per share.
In addition, Becker maintained his stock ownership holding while making purchases of options at reduced prices at which they may be exercised.
Yet, Becker is not the first executive working for Silicon Valley Bank (SVB) to sell their shares. Chief Marketing Officer Michelle Draper, Chief Financial Officer Daniel Beck, and Chief Operational Officer Philip Cox are just a few of the leaders whose names appear on the list of those who have sold shares since 2021 for multiple millions of dollars.
Over the previous two years, all of these executives collectively sold shares of stock with a market value of $84 million.
Because of this announcement, there has been significant backlash toward SVB’s management, which has raised questions regarding possible insider stock transactions before the significant drop.
Rep. Ro Khanna, a Democrat from California, has lashed out at Becker, arguing that he should refund the money to the depositors. Becker is the target of Khanna’s criticism (1). Khanna added the following to his tweet on Monday:
“I have advocated for the idea that some of that money ought to be taken back. No matter what his reasons were, and we ought to investigate them, that $3.6 million should be distributed to depositors.
Details of the SEC Filing
According to documents filed with the SEC on January 26, it was revealed that Becker had sold company shares as part of a predetermined plan designated as a 10b5-1 plan.
Insiders will be able to pre-arrange the sale of their shares under this proposal, which should help ease any worries regarding the use of insider information in financial transactions.
But, in a recent statement, the Chair of the SEC, Gary Gensler, voiced his worries, noting that insiders have already been selling immediately after filing the plans. Making one-off scheduled sales results in creating many plans or overlapping plans.
As a direct consequence, the SEC is contemplating introducing additional requirements regarding disclosures, transparency, and timetables for scheduled sales.
Between the time of the filing and the first sale that follows, it intends to impose a “cooling off period” of ninety days. According to these guidelines, Becker’s sales that occurred just one month after the filing would not be permitted. These sales occurred exactly one month after the filing.
When Terren Peizer, executive chairman of Ontrak, sold more than $20 million worth of the company’s stock before it dropped by 44%, the Securities and Exchange Commission (SEC) charged him with insider trading in order to send a strong message to other inside sellers.