There has been lots of breathless commentary in the financial press and the blogosphere over the SEC’s August 2021 filing of an insider-trading case involving so-called “shadow trading.” Shadow trading as defined in a 2020 academic paper occurs when someone possessing material, nonpublic information (“MNPI”) obtained from his or her employer uses it to trade in the securities of a competitor or economically-linked public company.[1] This is in contrast to the more usual insider trading, in which the stock being traded is that of the subject company. In Panuwat, the defendant is charged with misappropriating MNPI from his employer and using it to trade in a competitor’s securities.[2] Earlier this week, a district court in the Northern District of California denied a motion to dismiss the SEC’s complaint, allowing the enforcement action to proceed.[3]
Continue Reading SEC Complaint Upheld in Rare – But Not Unprecedented – Shadow Trading Case
