Silicon Valley Bank (SVIB) Lawsuit – SVIB Stock Dropped 98% in Early 2023 Due to a Liquidity Crunch, Causing Substantial Investor Losses in Silicon Valley Bank
Former SVB Employees who sustained losses from holding concentrated or margined positions in SVB may be able to hold their brokerage firms liable in FINRA arbitration claims. SVB’s significant and rapid stock decline in March 2023 put unhedged concentrated positions at risk, exposing any failures to employ such strategies. As a result, SVB shareholders, including former Silicon Valley Bank employees, who held a concentrated position and used it as collateral for margin loans likely received a margin call and a substantial portion of their stock was liquidated. As financial advisors have a duty to their clients to recommend strategies to manage the risk with concentrated stock positions, former SVB employees who suffered investment losses in SVIB should contact Peiffer Wolf immediately by calling 585-310-5140 or by filling out an online Contact Form for a FREE Consultation.
SVB, through its businesses Silicon Valley Bank, SVB Capital, SVB Private and SVB Securities, offer commercial banking, venture investing, wealth planning and investment banking. The firm is headquartered in Santa Clara, California, and has 17 branches in California and Massachusetts. SVB Financial Group (NASDAQ: SIVB) is the holding company for SVB’s business units and groups.
In 2021, U.S. venture capital-backed companies raised a record $330 billion, which is double the amount seen in 2020. In the low-interest rate environment of recent years, SVB received billions of dollars from venture-backed clients, and the bank invested the funds in longer-term bonds. Specifically, SVB’s $21 billion bond portfolio was yielding an average of 1.79%, while the 10-year Treasury yield was about 3.9%. As interest rates rose higher and bond prices declined, SVB started taking substantial losses on their long-term bond holdings.
When SVB reported its fourth-quarter results in early 2023, Moody’s Investor Service declared that SVB was at high risk for a downgrade due to its significant unrealized losses. SVB then looked to sell $2 billion of its investments at a loss to help boost liquidity for its balance sheet. Venture capitalists then quickly moved to limit exposure to the bank, which caused a liquidity squeeze and prompted state and federal regulators to intervene and shut down the bank.
“[SVB’s] Shareholders and certain unsecured debtholders will not be protected.”
On Sunday, March 12, 2023, the Federal Reserve, the Treasury Department, and the FDIC issued a joint press release stating that Silicon Valley Bank depositors will have access to all of their money starting Monday, March 13. However, the release stated that “Shareholders and certain unsecured debtholders will not be protected.” As a result, SVIB equity holders have suffered heavy investment losses.
FINRA Rule 2111 requires broker-dealers or associated persons to “have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the [firm] or associated person to ascertain the customer’s investment profile.” Further, investors who hold large positions in SVIB and are not diversified must employ risk management strategies. Financial advisors have a duty to their clients to recommend strategies to manage the risk with SVIB concentrated stock positions, and Peiffer Wolf encourages investors to explore their legal options.
As financial advisors have a duty to their clients to recommend strategies to manage the risk with concentrated stock positions, former SVB employees who suffered investment losses in SVIB should contact Peiffer Wolf immediately by calling 585-310-5140 or by filling out an online Contact Form for a FREE Consultation.
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