Late last year, Norges Bank Investment Management (NBIM), Norway's sovereign wealth fund, announced that it would be leading a class action lawsuit related to the collapse of Silicon Valley Bank (SVB). In a recent court filing, the investors expanded their lawsuit to not only include SVB's board and its executives, but also the bank's auditor and the investment banks that helped it raise money.
The lawsuit named accounting firm KPMG and four Wall Street banks — Goldman Sachs, Bank of America, Keefe, Bruyette & Woods, and Morgan Stanley. The investors allege that they all "utterly failed in their role as gatekeepers," claiming a loss of more than $24 billion in market value. Presenting interviews with unnamed former employees, the lawsuit argues that SVB "suffered from rampant weaknesses in its controls" and that executives failed to act even after employees had raised concerns.
SVB's management defends its actions, attributing the bank's failure to rapid interest rate hikes and an extraordinary social media-driven bank run. "I made the best decisions we could with the facts, forecasts, and outside expert advice available to us at the time," said former CEO Greg Becker in congressional testimony last year.
This lawsuit comes as Norges has increasingly adopted a stewardship role regarding companies in its portfolio in recent years. "We need to make sure financial markets have the integrity that is necessary to work in a proper way," Norges CEO Nicolai Tangen said in an interview at the World Economic Forum in Davos last week. “There are fewer and fewer active investors who are participating in the process of keeping this integrity alive.”
In our 2020 Compendium, Starling Advisor Siew Kai Choy — former Managing Director of GIC, Singapore's sovereign wealth fund — explained why investors have this responsibility.
"Institutional investors have a stewardship interest in promoting the long-term health of the companies in their portfolios," Choy wrote. “By acting to ensure that boards pursue effective corporate governance objectives, institutional investors align company interests with the investors’ own.” ▸ Read More
Join The Discussion