The Securities and Exchange Commission (SEC), the regulator of American financial markets and the Department of Justice (DOJ) decided to look into the bankruptcy of Silicon Valley Bank (SVB) at the beginning of the week. The two separate investigations should, among other things, look at the sale of shares in the bank by its management team.
The bankruptcy of the SVB on March 10, 16th bank in the United States, managing 209 billion dollars in assets, is the second largest in the history of the country, with that of Lehman Brothers in 2008. Washington quickly guaranteed the deposits of SVB customers to avoid a domino effect, but such an event naturally led to the opening of investigations. It is common for regulators and prosecutors to initiate such a procedure after large and unexpected losses of financial institutions.
An investigation that does not bode well for possible fraud or insider trading
The separate SEC and DOJ proceedings are only in their preliminary stages and no formal charges have been established at this stage, according to the Wall Street Journal, the origin of the information. SEC Chairman Gary Gensler said on Sunday, March 12, ” Without speaking to any entity or individual person, we will investigate and take enforcement action if we find violations of federal securities laws. »
Investigations, however, are expected to look closely at SVB’s share sales on February 27. Are concerned Greg Becker, CEO for 12 years of the bank and until its takeover on March 10 by the Federal Deposit Insurance Corp (FDIC) and Daniel Beck, its chief financial officer for 6 years. The first sold for the equivalent of 2.3 million dollars of shares and the second a third of its positions, for 575,000 dollars.
If the temporal proximity between the operations and the fall of the SVB quickly aroused suspicion, the situation is slightly more complex. To avoid insider trading, the SEC has imposed since 2000 a special procedure for the sale of shares by the directors of a company. The 10b5-1 plan requires scheduling a sale at least 30 days in advance. The sell orders of Greg Becker and Daniel Beck therefore date from the end of January. Moreover, according to the American press, they do not go beyond the ordinary operations of the management. The SEC in December extended this waiting period to 90 days, but the entry into force of this change took place… On February 27th.
The SEC and DOJ will now go through mandatory SVB reports by management, statements to investors, transparency on financial risks or business uncertainties by the bank. THE Wall Street Journal reports optimistic statements in the weeks leading up to the bankruptcy.
Today it is the FDIC which has taken the lead of the SVB. The parent company, SVB Financial Group, which still controls several segments of the company, the investment bank, the Venture Capital branches, is looking for a buyer according to a March 13 filing.