Court Upholds SEC’s Victory in “Shadow Trading” Case

A federal court in California refused to grant a judgment or a new trial to a defendant who was found to have engaged in insider trading when he purchased securities of one company based on material nonpublic information (“MNPI”) about a different company. The September 9, 2024 decision in SEC v. Panuwat (N.D. Cal.) leaves intact a jury verdict that could embolden the SEC to pursue more claims of “shadow trading,” which involves trading the securities of a public company that was not the direct subject of the MNPI but whose stock price allegedly was affected by a “spillover” impact from that information.

The court imposed the maximum civil penalty of $321,197.40 on the defendant and enjoined him from future violations of the securities laws. But while the court considered the defendant’s conduct to have constituted a “serious” (although not “egregious”) violation that “deserves a remedy that will deter him and others from similar conduct,” it refused to “permanently…