Jumping At Shadows: The Implications Of SEC v. Panuwat
January 27, 2022 | The Insider: White Collar Defense and Securities Enforcement
On January 14, 2022, in SEC v. Panuwat, Index No. 21-cv-06322 (N.D. Cal.), Judge William H. Orrick denied the defendant’s motion to dismiss the SEC’s first-ever “shadow trading” enforcement action. “Shadow trading” is the name given to a novel theory of insider trading by a recent academic article that describes an individual’s use of inside information about one company to trade the stock of a separate but “economically-linked” company, such as a competitor, business partner, or supplier. That theory seems to have gained some traction with Judge Orrick. His decision denying Panuwat’s motion to dismiss has already been hailed as a significant victory for the SEC. But predictions that shadow trading actions are here to stay may be premature.