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 February 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.

On Friday, Silicon Valley Bank failed after a week of tumult fuelled by a letter the firm sent to shareholders that it would try to raise more than $2 billion in capital after taking losses. The announcement sent shares in the company plunging, even as Becker urged clients to stay calm. 

Neither Becker nor SVB immediately responded to questions about his share sale, and whether the CEO was aware of the bank’s plans for the capital raise attempt when he filed the trading plan. The sales were made through a revocable trust controlled by Becker, filings show.

Prearranged Plans

There’s nothing illegal about corporate trading plans like the one Becker used. The plans were set up by the Securities and Exchange Commission in 2000 to thwart the possibility of insider trading. The idea is to avoid malfeasance by limiting sales to predetermined dates on which an executive can sell shares, and the timing could merely have been coincidental.

However, critics say the prearranged share-sale plans, called 10b5-1 plans, have significant loopholes, including that they lack mandatory cooling-off periods. 

“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.”

In December, the SEC finalised new rules that would mandate at least a 90-day cooling-off period for most executive trading plans, meaning that they can’t make trades on a new schedule for three months after they take hold.

Executives are required to start complying with those rules on April 1.