A scathing Federal Reserve report on the collapse of Silicon Valley Bank released on Friday could be a boon to shareholders suing the defunct lender's executives for allegedly hiding risks that led to its stunning downfall, legal experts said.
The Fed took its own share of the blame for SVB's sudden collapse in March but also concluded that "foundational and widespread managerial weaknesses" at the bank left it "acutely exposed" to the one-two punch of rising interest rates and tech sector slowdown, which led to a run on deposits and subsequent government takeover.
"A report where the government is talking about all the problems it believed were present at SVB is icing on the cake for plaintiffs' lawyers," said James Cox, professor at Duke University School of Law.
SVB was shut down by state and federal banking regulators on March 10. The bank's parent company, SVB Financial Group, entered bankruptcy on March 17. As a result, shareholders cannot press claims directly against the bank or its parent.
But the bank's former executives face a bevy of proposed class action lawsuits by shareholders who allege they failed to disclose the bank's exposure to rising rates, over-reliance on tech depositors and deficient risk-management practices, among other things.
The Fed's report concluded that SVB did not adequately hedge against risk, failed its own liquidity stress tests, and chased short-term profits at the expense of long-term stability. Rather than address these risks, the bank changed how it measured them, the report found.
"What we've seen is consistent with what we alleged, which is that this is a failure of risk management at the bank," said attorney Adam Polk, whose law firm has brought a case against SVB entities in California state court.
Mr Polk said he and his team will use the report as a road map for discovery and likely incorporate its findings into any amended complaint they file.
SVB's bankruptcy limits the available pot of money to the lender's directors and officers liability insurance policy, a type of coverage that protects the personal assets of company leaders.
Much bigger targets are the auditors, investment banks and other third parties that could be sued for allegedly aiding, abetting or breaching their duties to prevent SVB's collapse.
"I see this [Fed] report as being extraordinarily useful evidence to dangle in front of a judge or jury on class action lawsuits against accounting firms," Mr Cox said.
I see this [Fed] report as being extraordinarily useful evidence to dangle in front of a judge or jury on class action lawsuits against accounting firms
James Cox,
professor at Duke University School of Law
In April, a group of SVB investors became the first to sue the lender's accountants and underwriters, including accounting firm KPMG and investment banks Goldman Sachs, Bank of America and Morgan Stanley.
The Fed report could also work in favour of defence lawyers, because the regulator fell on its sword and said that it neither fully appreciated SVB's vulnerabilities nor ensured that its warnings about them were acted upon.
That could create an opening for defendants to argue that they cannot be held liable for not properly addressing risks that also slipped past SVB's regulators, according to legal experts.
But the Fed repeatedly warned SVB about its weaknesses, even if those warnings lacked gusto: At the time of its failure, SVB had 31 unaddressed safe and soundness supervisory warnings, triple the number of its peers.
Plaintiffs could argue those were red flags that should have been swiftly addressed or at least disclosed by management, according to Columbia Law School professor Eric Talley.
"That's going to hinge on how high up the warnings went up and how urgent they were, and those things will be tied to each other," Mr Talley said.
The specs
Engine: 5.0-litre supercharged V8
Transmission: Eight-speed auto
Power: 575bhp
Torque: 700Nm
Price: Dh554,000
On sale: now
yallacompare profile
Date of launch: 2014
Founder: Jon Richards, founder and chief executive; Samer Chebab, co-founder and chief operating officer, and Jonathan Rawlings, co-founder and chief financial officer
Based: Media City, Dubai
Sector: Financial services
Size: 120 employees
Investors: 2014: $500,000 in a seed round led by Mulverhill Associates; 2015: $3m in Series A funding led by STC Ventures (managed by Iris Capital), Wamda and Dubai Silicon Oasis Authority; 2019: $8m in Series B funding with the same investors as Series A along with Precinct Partners, Saned and Argo Ventures (the VC arm of multinational insurer Argo Group)
The specs
Engine: 3.0-litre six-cylinder MHEV
Power: 360bhp
Torque: 500Nm
Transmission: eight-speed automatic
Price: from Dh282,870
On sale: now
Company%20Profile
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The%20Color%20Purple
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Match info
Manchester City 3 (Jesus 22', 50', Sterling 69')
Everton 1 (Calvert-Lewin 65')
Day 2, stumps
Pakistan 482
Australia 30/0 (13 ov)
Australia trail by 452 runs with 10 wickets remaining in the innings
Company%20profile
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Groom and Two Brides
Director: Elie Semaan
Starring: Abdullah Boushehri, Laila Abdallah, Lulwa Almulla
Rating: 3/5
The Byblos iftar in numbers
29 or 30 days – the number of iftar services held during the holy month
50 staff members required to prepare an iftar
200 to 350 the number of people served iftar nightly
160 litres of the traditional Ramadan drink, jalab, is served in total
500 litres of soup is served during the holy month
200 kilograms of meat is used for various dishes
350 kilograms of onion is used in dishes
5 minutes – the average time that staff have to eat
UAE currency: the story behind the money in your pockets
MATCH INFO
Euro 2020 qualifier
Fixture: Liechtenstein v Italy, Tuesday, 10.45pm (UAE)
TV: Match is shown on BeIN Sports
The biog
Age: 32
Qualifications: Diploma in engineering from TSI Technical Institute, bachelor’s degree in accounting from Dubai’s Al Ghurair University, master’s degree in human resources from Abu Dhabi University, currently third years PHD in strategy of human resources.
Favourite mountain range: The Himalayas
Favourite experience: Two months trekking in Alaska
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
Global state-owned investor ranking by size
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More from Aya Iskandarani
Personalities on the Plate: The Lives and Minds of Animals We Eat
Barbara J King, University of Chicago Press
The BIO:
He became the first Emirati to climb Mount Everest in 2011, from the south section in Nepal
He ascended Mount Everest the next year from the more treacherous north Tibetan side
By 2015, he had completed the Explorers Grand Slam
Last year, he conquered K2, the world’s second-highest mountain located on the Pakistan-Chinese border
He carries dried camel meat, dried dates and a wheat mixture for the final summit push
His new goal is to climb 14 peaks that are more than 8,000 metres above sea level
Dust and sand storms compared
Sand storm
- Particle size: Larger, heavier sand grains
- Visibility: Often dramatic with thick "walls" of sand
- Duration: Short-lived, typically localised
- Travel distance: Limited
- Source: Open desert areas with strong winds
Dust storm
- Particle size: Much finer, lightweight particles
- Visibility: Hazy skies but less intense
- Duration: Can linger for days
- Travel distance: Long-range, up to thousands of kilometres
- Source: Can be carried from distant regions
MATCH INFO
Champions League quarter-final, first leg
Ajax v Juventus, Wednesday, 11pm (UAE)
Match on BeIN Sports
How Apple's credit card works
The Apple Card looks different from a traditional credit card — there's no number on the front and the users' name is etched in metal. The card expands the company's digital Apple Pay services, marrying the physical card to a virtual one and integrating both with the iPhone. Its attributes include quick sign-up, elimination of most fees, strong security protections and cash back.
What does it cost?
Apple says there are no fees associated with the card. That means no late fee, no annual fee, no international fee and no over-the-limit fees. It also said it aims to have among the lowest interest rates in the industry. Users must have an iPhone to use the card, which comes at a cost. But they will earn cash back on their purchases — 3 per cent on Apple purchases, 2 per cent on those with the virtual card and 1 per cent with the physical card. Apple says it is the only card to provide those rewards in real time, so that cash earned can be used immediately.
What will the interest rate be?
The card doesn't come out until summer but Apple has said that as of March, the variable annual percentage rate on the card could be anywhere from 13.24 per cent to 24.24 per cent based on creditworthiness. That's in line with the rest of the market, according to analysts
What about security?
The physical card has no numbers so purchases are made with the embedded chip and the digital version lives in your Apple Wallet on your phone, where it's protected by fingerprints or facial recognition. That means that even if someone steals your phone, they won't be able to use the card to buy things.
Is it easy to use?
Apple says users will be able to sign up for the card in the Wallet app on their iPhone and begin using it almost immediately. It also tracks spending on the phone in a more user-friendly format, eliminating some of the gibberish that fills a traditional credit card statement. Plus it includes some budgeting tools, such as tracking spending and providing estimates of how much interest could be charged on a purchase to help people make an informed decision.
* Associated Press
The specs
Engine: Two permanent-magnet synchronous AC motors
Transmission: two-speed
Power: 671hp
Torque: 849Nm
Range: 456km
Price: from Dh437,900
On sale: now
AT%20A%20GLANCE
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Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
Company profile
Name: Steppi
Founders: Joe Franklin and Milos Savic
Launched: February 2020
Size: 10,000 users by the end of July and a goal of 200,000 users by the end of the year
Employees: Five
Based: Jumeirah Lakes Towers, Dubai
Financing stage: Two seed rounds – the first sourced from angel investors and the founders' personal savings
Second round raised Dh720,000 from silent investors in June this year
What can you do?
Document everything immediately; including dates, times, locations and witnesses
Seek professional advice from a legal expert
You can report an incident to HR or an immediate supervisor
You can use the Ministry of Human Resources and Emiratisation’s dedicated hotline
In criminal cases, you can contact the police for additional support
'Morbius'
Director: Daniel Espinosa
Stars: Jared Leto, Matt Smith, Adria Arjona
Rating: 2/5
