Ahead of the collapse of the Silicon Valley Bank (SVB), many of the company’s top executives sold their shares worth $4.5 million in the company. The bank’s Chief Executive Officer Gregory Becker, Chief Financial Officer Daniel Beck, and Chief Marketing Officer Michelle Draper sold their shares of the bank’s parent company SVB Financial Group.

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While CEO and President Becker sold over 12,000 shares for $3,578,652.31 on February 26, CFO Beck sold $575,180 in stocks in a separate transaction on the same day. Draper’s shares were sold over several transactions in earlier months, data from the US Securities Exchange Commission's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system revealed. The company’s executives have been steadily selling stocks since May 2021, further filings show.

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The most recent dumping of stocks by Becker, who had not sold any shares in over a year, was done through the pre-arranged share sale through 10b5-1 plans. These plans allow company insiders and executives to arrange to sell shares on certain predetermined dates in order to prevent illegal insider trading.

However, while 10b5-1 plans are not illegal they are not without their own loopholes. The biggest loophole is the lack of any mandatory cooling-off period allowing executives to trade shares on the next predetermined date.

While the US market regulator has responded by introducing a 90-day mandatory cooling-off period which would prevent executives from trading shares in the next three-month period, the new regulations are only going into effect from April 1.

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The bank, which was once the 16th largest bank in the US serving HNI or high net-worth individuals and venture capitalists, started on a downhill slope when the Federal Reserve began hiking interest rates last year. While increasing interest rates should have meant more profit, the bank also needed more cash on hand to meet its deposit obligations.

After having to sell its treasury bonds, whose prices crashed due to rapid interest rate hikes, on a $1.8 billion loss the bank had to sell other assets. This resulted in a series of events that finally culminated when the bank informed shareholders that it would be looking to raise over $2.25 billion through a fresh issue of stock sell, which then triggered a bank run and the bank’s collapse.

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(Edited by : Sudarsanan Mani)

First Published:Mar 11, 2023 1:59 PM IST