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SEC Prevails on Insider “Shadow Trading” Theory

By Randi Morrison posted 04-21-2024 04:28 PM

  

In this memo: “SEC Successfully Prosecutes Novel “Shadow Trading” Theory at Trial,” Gibson Dunn summarizes a recent insider trading victory by the SEC based on “shadow trading,” wherein an executive allegedly used his possession of material nonpublic information about an imminent transaction involving his own company (Medivation Inc.) to trade in the securities of an uninvolved industry peer company that he believed would benefit from the transaction. Medivation’s insider trading policy prohibited using company information for personal financial gain by trading in the company’s securities or the securities of other publicly traded companies. While the defendant is expected to appeal the verdict, the decision warrants companies’ review of the breadth and intended breadth of their insider trading policies and associated training and enforcement efforts.

See “Takeaways for In-House Counsel from the SEC’s ‘Shadow Insider Trading’ Trial” (Morrison Foerster) and additional resources on our Insider Trading/Section 16/Rule 10b5-1 page.

                      This content first appeared in the Society Alert!

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