SEC's 'Shadow Trading' Theory Passes Muster With Judge

By Dean Seal (January 18, 2022, 11:45 AM EST) -- A California federal judge has denied a motion to dismiss the U.S. Securities and Exchange Commission's first major enforcement action premised on the practice of "shadow trading," saying the agency's unique theory of liability fits within the contours of insider trading law.

U.S. District Judge William H. Orrick ruled Friday that the SEC's complaint against Matthew Panuwat, former head of business development for Medivation Inc., adequately alleges that Panuwat breached his duty to the company by using nonpublic information about its upcoming merger with Pfizer Inc. to profitably trade on shares of one of Medivation's rivals, Incyte Corp.

Medivation's insider trading...

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