Topline
Federal regulators have opened an investigation into former First Republic Bank executives to determine whether they took part in insider trading before the firm collapsed Monday, according to Bloomberg, in one of the nation’s biggest-ever banking busts.
First Republic Bank headquarters is seen on March 16, 2023 in San Francisco. (Photo by Tayfun … [+]
Key Facts
The status of the Securities and Exchange Commission probe is not publicly known and it is not clear which executives the SEC is scrutinizing, Bloomberg reported, citing two people with knowledge of the investigation.
The federal government seized First Republic early Monday morning and swiftly sold the bank to JPMorgan Chase, marking the second-biggest banking failure in U.S. history, behind only the 2008 collapse of Washington Mutual.
An SEC spokesperson told Forbes the agency “does not comment on the existence or nonexistence of a possible investigation,” while JPMorgan did not return a request for comment.
Key Background
First Republic’s failure has rung alarm bells about the stability of the American financial sector, even though Biden Administration officials have repeatedly said there is no cause for major concern—particularly when it comes to the nation’s largest banks. First Republic’s collapse was the latest in a chain of failures among similarly structured regional banks, like Silicon Valley Bank and Signature Bank, which were squeezed as a consequence of the Federal Reserve’s continued interest rate hikes. The banks faced major liquidity problems as they dealt with social media-driven runs that led to a rush of customers withdrawing cash, primarily due to concerns about the firms’ heavy investment of deposits into U.S. Treasuries—which had been seen as safe investments but lost value as the Fed rapidly increased interest rates. SVB’s failure has also sparked an SEC investigation into possible insider trading, while former executives there additionally face a Justice Department criminal probe.
Tangent
Reuters reported in March that Massachusetts regulators are also investigating First Republic executives for potential insider trading.
Further Reading
First Republic Taken Over By JP Morgan After Regulators Shut It Down (Forbes)
First Republic Bank Reportedly On Verge Of Collapse (Forbes)
What To Know About Silicon Valley Bank’s Collapse—The Biggest Bank Failure Since 2008 (Forbes)
What Happened To Signature Bank? The Latest Bank Failure Marks Third Largest In History (Forbes)
Fed Raises Rates Another 25 Basis Points—Signals Pause May Come If Greater ‘Risks Emerge’ (Forbes)
Source: https://www.forbes.com/sites/nicholasreimann/2023/05/05/first-republic-bank-executives-reportedly-under-investigation-for-possible-insider-trading/