SEC's 'Shadow Trading' Trial To Test Insider Info Boundaries

Edward Imperatore spoke with Law360 about the U.S. Securities and Exchange Commission’s insider trading enforcement action against Matthew Panuwat, a former public company executive who allegedly used inside information from his company to purchase securities of a competitor company, a theory that has come to be known as “shadow insider trading.”

Edward noted that the U.S. Department of Justice (DOJ) has “not brought a parallel case” to SEC v. Panuwat. He stated, "DOJ is looking at this as a test case, and they're taking a wait-and-see approach to [see] how the trial goes before making a determination about whether this is a viable theory."

Edward added, “In my experience, insider trading cases typically boil down to common sense inferences about an individual’s state of mind.” "The basic question the jury will ask is: Did the defendant know what he was doing was wrong?"

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