Gluesenkamp Perez, Magaziner Urge the SEC to Hold Silicon Valley Bank Executives Accountable

Filings Show Bank Executives Sold Millions in Stock Ahead of Collapse

Mar 20, 2023
Press

Today, following the collapse of Silicon Valley Bank, Reps. Marie Gluesenkamp Perez (WA-03) and Seth Magaziner (RI-02) penned a letter to Securities and Exchange Commission (SEC) Chairman Gary Gensler urging the Commission to hold Silicon Valley Bank executives accountable for wrongdoing in the days leading up to the collapse.

According to SEC filings, Silicon Valley Bank Chief Executive Greg Becker sold nearly $3.6 million in shares and Chief Financial Officer Daniel Beck sold $575,000 worth of shares – just days before the collapse – by use of 10b5-1 plans filed in January.

10b5-1 plans allow corporate insiders to sell shares by scheduling share sales in advance; however, the timing of the executives’ stock sales suggest they were attempting to “skirt” a new rule to address misuse of 10b5-1 plans, prompting an SEC investigation.

In the letter, the lawmakers request that the SEC publicly report on the findings of this investigation and reforms that could be undertaken by the SEC or Congress to further combat insider trading.

“A healthy banking system necessitates that people have faith in the integrity and solvency of banks of ALL sizes,” wrote the members. “We hope the SEC will use as many resources as possible to uncover any wrongdoing and restore public faith in these institutions and the system at large.”

“So many small business owners who choose to bank at regional banks were put under an immense amount of stress because of the Silicon Valley Bank collapse and the reckless and potentially criminal behavior from bank executives that led to it,” said Rep. Gluesenkamp Perez. “We need to make sure that white-collar crime is treated with the same level of seriousness as blue-collar crime, and that’s why I’m proud to join Rep. Magaziner in demanding accountability to help restore faith and stability in our banking system.”

“Together with Rep. Gluesenkamp Perez, I’m calling on the SEC to investigate the SVB executives who dumped millions of dollars in stock just days before the bank collapsed,” said Rep. Seth Magaziner. “Their irresponsible, potentially criminal behavior undermines the integrity of our financial institutions and harms the working Americans who rely on banks – big and small – to cover daily expenses, pay their employees, and care for their families. When wealthy bank executives use their wealth and power to protect their personal profits, they must be held accountable to the fullest extent of the law.”

A copy of the letter can be found here and below:

Hon. Gary Gensler, Chair

Securities and Exchange Commission

100 F Street, NE

Washington, DC 20549

Dear Chair Gensler,

We write today urging the Securities and Exchange Commission (SEC) to use all tools at its disposal to hold Silicon Valley Bank (SVB) executives accountable for wrongdoing in the days leading up to the bank’s collapse.

Small business owners and workers across the country rely on banks–big and small–to make daily expenses and pay their employees.While part of that trust lies in ensuring banks are solvent, we must also shore up the integrity of financial institutions. The concerns laid out in this letter drastically undermine depositor faith in banks and must be addressed.

By nature of their positions, corporate executives have access to nonpublic information that could give them a financial advantage when trading shares. For nearly 20 years, so-called 10b5-1 plans have set rules of the road to ensure executives don’t engage in insider trading. These plans allow corporate insiders to sell shares by scheduling share sales in advance. 

According to SEC filings, SVB Chief Executive Greg Becker sold nearly $3.6 million in shares, and SVB Chief Financial Officer Daniel Beck sold $575,000 worth of shares, on February 27, 2023, just eleven days before the SVB collapse. Both of these sales were done under a 10b5-1 plan filed in January.

Notably, the SEC adopted a series of key reforms to Rule 10b5-1 on December 22, 2022. In doing so, you noted the potential abusive practices around 10b5-1 plans. The additional safeguards include a mandatory 90-day cooling off period, director and officer certifications regarding material nonpublic information and an enhanced good faith condition applicable to all plans and sales. These new rules took effect on the exact date the executives sold their stock, February 27, 2023, and apply to plans filed after April 1, 2023. The timing of the executives’ 10b5-1 plans and stock sales (executed well within the reformed Rule’s 90-day window that would have prohibited the sales) suggests they were attempting to “skirt” the new, enhanced rule.  

At best, the behavior of SVB executives misleading customers and potential investors in the weeks leading up to the collapse was immoral. At worst, this behavior is potentially criminal. We are pleased the SEC has opened an investigation into these transactions. To the extent possible, we urge you to publicly report on the findings of this investigation and reforms that could be undertaken by the SEC or Congress to further strengthen insider trading rules.

A healthy banking system necessitates that people have faith in the integrity and solvency of banks of ALL sizes. We hope the SEC will use as many resources as possible to uncover any wrongdoing and restore public faith in these institutions and the system at large.

We look forward to your response. 

Sincerely,

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