Last month a federal jury agreed with the SEC that a corporate official had engaged in illegal insider trading when he bought securities of a company based upon his access to material nonpublic information about a different company. The verdict was in the case of SEC v Panuwat and SEC watchers are saying that this is a key focus of the agency and it is expected to pursue more cases of shadow trading. So what is “shadow trading?” This is where a person trades the securities of a public company that is not the subject of the nonpublic information but rather is a company whose stock price would be affected by that news.
In the Panuwat case, Matthew Panuwat was the head of business development at a biopharm company Medivation. He learned that the company was about to be acquired and a few minutes after reading an email reporting the potential purchaser Panuwat bought call options on securities issued by Incyte, another biopharm company that shared Medivation’s general market space. The SEC successfully alleged that Incyte would be more attractive to potential purchasers once the Medication deal was announced and its stock price would rise. Stay tuned.
Jeffrey Newman is a whistleblower lawyer and former reporter, whose firm represents whistleblowers in healthcare fraud cases under the False Claims Act (FCA) and also under the Securities and Exchange, FINCEN and CFTC whistleblower programs. He can be reached at Jeff@JeffNewmanLaw.com or at 617-823-3217
