Massachusetts Opens Investigation into First Republic Stock Sales
Massachusetts regulators have initiated an investigation into stock sales by top executives at First Republic Bank. The transactions occurred just weeks before the recent banking turmoil that has shaken the global banking sector.
Subpoena Issued to First Republic for Insider Trading Details
William Galvin, Massachusetts' Secretary of the Commonwealth, has subpoenaed the First Republic, seeking information about the bank's insider trading policies and how executives managed their stock sales starting from January 1.
Recent Bank Failures Impact Global Banking Sector
Over the past month, a series of U.S. bank failures have disrupted the global banking industry. Silvergate Capital Corp ceased operations on March 8, followed by Silicon Valley Bank and Signature Bank being seized by regulators due to liquidity crises, leading to diminished investor confidence.
Similar Probe into SVB Financial Group Insider Sales
Galvin's office has also opened a similar investigation into insider sales by executives at SVB Financial Group, the owner of Silicon Valley Bank, until its failure. Both banks maintain branches in Massachusetts.
First Republic Share Price Drops Amid Banking Collapse
First Republic's share price fell nearly 90% in March following the collapse of SVB. The bank's strategy of offering preferential rates to high net-worth customers has made it more vulnerable than regional lenders with less-affluent clientele, as U.S. deposit insurance only guarantees $250,000 per savings account.
Galvin's Office Examines Insiders' Trading Activity
Galvin's office is particularly interested in analyzing insiders' trading activities leading to the recent banking turmoil. Galvin has a history of aggressive enforcement as a securities regulator.
First Republic Executives' Share Sales in 2023
Several First Republic executives, including founder and Executive Chairman James Herbert, have sold shares in 2023. According to Federal Deposit Insurance Corporation filings, Herbert has sold $4.5 million worth of shares this year.
Increased Scrutiny of Bank Executives Amid Banking Crisis
Galvin's probe highlights the growing scrutiny of bank executives and their risk management practices in the wake of the recent banking crisis. Banking regulators, federal prosecutors, and the SEC are all investigating SVB's collapse.