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That's, ultimately, a loophole many CEOs use. They have to preschedule the sale of stock so it's not insider trading. However they can cancel those trades. At l

That's, ultimately, a loophole many CEOs use. They have to preschedule the sale of stock so it's not insider trading. However they can cancel those trades. At least that's how it was the last time I checked. I was told this by a large, prominent, network security organization CEO years ago. Basically, from this [0] article: "This general prohibition addresses a significant loophole in the current Rule 10b5-1, which permits insiders to adopt multiple trading plans and selectively cancel certain plans based on material nonpublic information." So it looks like 10b5-1 was supposed to change. But I'm not aware that it did. Regardless 10b5-1 was just a cover so they couldn't be prosecuted for insider trading as it was operating. [0] https://www.reuters.com/legal/legalindustry/secs-run-revamping-rule-10b5-1-deter-insider-trading-2023-01-26/ https://www.reuters.com/legal/legalindustry/secs-run-revampi...

gruez 4y ago
But is there evidence that the CEO was abusing this loophole? For instance, a string of cancellations in the months/quarters leading up to it?
- windexh8er 4y ago
  It really doesn't matter. He had insider information that this was about to happen. He should have cancelled the trades knowing what he knew. See the loophole is this only works one way: in favor of the CEO.
  - windexh8er 4y ago
    And just as an aside - keep in mind Greg Becker was not only the CEO of SVB, but also on the Federal Reserve Bank of San Francisco [0]. It also appears he very well knew the loophole he was abusing [1]: "Silicon Valley Bank Chief Executive Officer Greg Becker sold $3.6 million of company stock under a trading plan less than two weeks before the firm disclosed extensive losses that led to its failure. The sale of 12,451 shares on Feb. 27 was the first time in more than a year that Becker had sold shares in parent company SVB Financial Group, according to regulatory filings. He filed the plan that allowed him to sell the shares on Jan. 26." ...and... "“While Becker may not have anticipated the bank run on Jan. 26 when he adopted the plan, the capital raise is material,” said Dan Taylor, a professor at the University of Pennsylvania’s Wharton School who studies corporate trading disclosures. “If they were in discussion for a capital raise at the time the plan was adopted, that is highly problematic.”" Apparently the new rules go into effect on April 1st. How convenient, and ironic. [0] https://news.bloomberglaw.com/bankruptcy-law/svb-ceo-no-longer-on-san-francisco-feds-board-after-bank-fails https://news.bloomberglaw.com/bankruptcy-law/svb-ceo-no-long... [1] https://www.bloomberg.com/news/articles/2023-03-10/svb-chief-sold-3-6-million-in-stock-days-before-bank-s-failure https://www.bloomberg.com/news/articles/2023-03-10/svb-chief...

gruez 4y ago

But is there evidence that the CEO was abusing this loophole? For instance, a string of cancellations in the months/quarters leading up to it?

windexh8er 4y ago
It really doesn't matter. He had insider information that this was about to happen. He should have cancelled the trades knowing what he knew. See the loophole is this only works one way: in favor of the CEO.
- windexh8er 4y ago
  And just as an aside - keep in mind Greg Becker was not only the CEO of SVB, but also on the Federal Reserve Bank of San Francisco [0]. It also appears he very well knew the loophole he was abusing [1]: "Silicon Valley Bank Chief Executive Officer Greg Becker sold $3.6 million of company stock under a trading plan less than two weeks before the firm disclosed extensive losses that led to its failure. The sale of 12,451 shares on Feb. 27 was the first time in more than a year that Becker had sold shares in parent company SVB Financial Group, according to regulatory filings. He filed the plan that allowed him to sell the shares on Jan. 26." ...and... "“While Becker may not have anticipated the bank run on Jan. 26 when he adopted the plan, the capital raise is material,” said Dan Taylor, a professor at the University of Pennsylvania’s Wharton School who studies corporate trading disclosures. “If they were in discussion for a capital raise at the time the plan was adopted, that is highly problematic.”" Apparently the new rules go into effect on April 1st. How convenient, and ironic. [0] https://news.bloomberglaw.com/bankruptcy-law/svb-ceo-no-longer-on-san-francisco-feds-board-after-bank-fails https://news.bloomberglaw.com/bankruptcy-law/svb-ceo-no-long... [1] https://www.bloomberg.com/news/articles/2023-03-10/svb-chief-sold-3-6-million-in-stock-days-before-bank-s-failure https://www.bloomberg.com/news/articles/2023-03-10/svb-chief...