SEC Looking Into Withdrawals Made From Silicon Valley Bank

The Securities and Exchange Commission (SEC) is reportedly looking into withdrawals made from Silicon Valley Bank before it collapsed.

One focus of the inquiry is whether executives at private equity firms cashed out their personal accounts at the bank before their clients, Bloomberg reported Tuesday (May 30), citing unnamed sources.

Reached by PYMNTS for comment, an SEC spokesperson said via email: “The SEC does not comment on the existence or nonexistence of a possible investigation.”

As part of its inquiry, the SEC has requested records of money transfers, investor communications and emails with the bank, according to the Bloomberg report.

Requests from SEC examiners may not indicate wrongdoing or lead to an investigation, the report said.

SEC rules cover how money managers handle client funds, and SEC Chair Gary Gensler has been focusing on the private equity industry, scrutinizing the firms’ fees and requiring more disclosure from them, per the report.

As PYMNTS reported March 15, shortly after the collapse of Silicon Valley Bank, new investigations often follow bank crises.

After that and other bank crises in March, calls quickly grew both for a tightening of banking regulations and investigations into executives at the failed institutions.

Hundreds of startups and venture capital (VC) firms did their banking and kept billions of dollars with Silicon Valley Bank before it went under the receivership of the Federal Deposit Insurance Corp. (FDIC) on March 10, The Information reported on March 10.

The bank had deep ties with the tech industry, many investors banked there and the bank was more willing than most to work with startups when they ran into tough times, according to the report.

Silicon Valley Bank was taken over by the FDIC after customer withdrawals and plummeting stock prices beset the bank and its parent company when its $1.8 billion after-tax loss on the sale of its investments led some investors to grow concerned about its liquidity.

After this and other turmoil, startups and VC firms began changing how they bank, The Wall Street Journal reported March 13.

For example, founders and investors said they were diversifying bank accounts, moving to bigger banks, opening insured cash-sweep accounts and making certain their balances are under the threshold insured by the FDIC, according to the report.