On March 29, 2024, Adrienne Gurley, Matthew Murphy, and Brandon Wong published “Out of the Shadows: SEC Test Case To Bring ‘Shadow Trading’ Into Light” in The American Lawyer. The following is an excerpt:
The U.S. Securities and Exchange Commission (SEC) is now at trial in an enforcement action against former biopharmaceutical executive Matthew Panuwat, related to so-called “shadow trading” activities. Panuwat allegedly purchased call options in biopharmaceutical company Incyte a mere seven minutes after learning that his own employer, Medivation, expected to be acquired by Pfizer. When Medivation announced its acquisition, Incyte’s stock price jumped approximately 8%, netting Panuwat about $107,000 in profit.
The court in late 2023 denied Panuwat’s motion for summary judgment, rejecting arguments on each of the four insider trading elements (materiality, non-public information, duty to Medivation, and scienter). The trial will not only be the first major test of the SEC’s “shadow trading” legal theory before a jury, but will also have significant ramifications for in-house counsel and compliance teams on how to train their employees on trading practices.
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