by Antonia Apps, George Canellos, and Isabel Pitaro
The Securities and Exchange Commission (“SEC”) has long wanted to find the right case to pursue so-called “shadow trading,” where insiders armed with material nonpublic information about their own company use that information to trade in the securities of another company whose stock is closely correlated, such as a peer in the same industry.[1] In SEC v. Panuwat, filed last year, the SEC may have found the perfect vehicle for extending the insider trading laws to shadow trading. On January 14, 2022, the SEC secured its first victory in the case, when Judge Orrick of the United States District Court for the Northern District of California denied the defendant’s motion to dismiss in a broadly worded opinion that could have far-reaching implications for public companies and the investment community.[2]