SEC Probes Top First Republic Executives Who Sold Millions Worth O=of Shares Before Crash - Report

The US regulators have launched a probe into the executives of First Republic Bank following the crisis-hit bank's takeover by JPMorgan. The Securities and Exchange Commission is investigating if executives of First Republic improperly traded on inside information, Bloomberg News reported, citing sources.

JPMorgan Chase entered into a deal to buy the San Francisco bank First Republic earlier this week. As per the deal, JPMorgan will pay $10.6 billion to the US Federal Deposit Insurance Corp (FDIC) for most of the assets of the failed bank.

First Republic Bank
First Republic Bank Wikimedia Commons

Improper Trades?

The news agency cited two people who are in the know of things saying that the investigation focuses on the trades that took place before the bank went into the hands of the FDIC.

The report added that there is no information on which former executives are the focus of the probe. There has so far been no report of any executives having been accused of wrongdoing.

Separately, the Daily Mail reported that large stock sales by some former First Republic executives had taken place ahead of the takeover of the bank by the FDIC. The SEC and First Republic did not respond to request for comments, the Daily Mail added.

Elizabeth Warren Raises Questions

The reports of the SEC investigation emerged after senior Democratic Senator Elizabeth Warren said First Republic executives were involved in 'mismanagement'.

The letter raised questions about the failed lender's risk management as well as executive pay and bonuses.

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A trader works at the New York Stock Exchange in New York, the United States, on Feb. 5, 2018. U.S. stocks closed sharply lower on Monday, with the Dow plummeting 4.60 percent, as the market took a heavy hit from panic sales. IANS

"You owe your customers and the public an explanation for the decisions that resulted in the costly failure of your bank ... The primary cause of the collapse...appears to be complacency, incompetency, and mismanagement by you and other bank executives," Warren said in a letter to First Republic's former CEO Michael Roffler.

The report adds that First Republic's Executive Chairman James Herbert II sold $4.5 million worth of shares in 2023. The proceeds from share sales by four top executives of the bank amounted to $11.8 million this year. These shares were sold at prices averaging around $130, the report said.

Last-Minute Action

The president of private wealth management, Robert Thornton, sold 73 percent of his shares for $3.5 million, CEO Michael Roffler offloaded about $1 million worth os shares in January, after selling $1.3 million worth of shares in November last year. Meanwhile, David Lichtman,Chief Credit Officer, offloaded about $2.5 million worth of shares in the bank so far this year.

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US dollar IANS

"Some of these sales came just days before the bank started facing liquidity troubles, as panicked investors sought to get their money back following the fall of Silicon Valley Bank and Signature Bank," the report says.