Since August of 2021, when charges were first announced in Securities and Exchange Commission v. Matthew Panuwat, the concept of “Shadow Trading” has cast uncertainty over what may be viewed and pursued as insider trading by the SEC. Insider trading law is complex, has a history of ambiguity, and has been defined and re-defined by numerous cases over time, so this latest twist is a highly unwelcome development.

“Shadow Trading” is a purported version of the “Misappropriation Theory” of insider trading, where trading on the basis of material non-public information (“MNPI”) is in breach of a duty owed to the source of the information. In Panuwat, the defendant used MNPI from and about a proposed transaction involving his employer not to trade in the securities of his employer, but to trade in the securities of a closely correlated competitor, a variation of the classic insider trading paradigm.  The SEC won its case in an April 2024 jury trial. If this stretch of insider trading doctrine holds up on appeal, an entirely new category of insider trading defendants is likely to be vigorously pursued by the SEC.

On January 30, please join us for a webinar with legal and compliance experts from Hudson Bay Capital Management and litigation specialist firm Dynamis LLP, diving deeper into shadow trading. During this session, we will explore the implications for the legal framework around insider trading, for private fund managers who come into possession of MNPI in the course of their business, and even for those who do not regularly come into possession of MNPI but face increased enforcement risks as a result of frequent trading in correlated names.

Attendee questions are welcome and encouraged. We hope you will join us for this timely and informative session.

Panelists:

• Scott L. Black, Chief Legal Officer & Chief Compliance Officer, Hudson Bay Capital Management LP
• Robert S. Frenchman, Partner, Dynamis LLP
• Suzan Rose, Senior Advisor, Government & Regulatory Affairs, AIMA