The U.S. Securities and Exchange Commission has a long history of adopting novel theories in litigation to convince the courts to expand the scope of the federal insider trading laws.

The SEC's latest effort comes in an Aug. 17 complaint, SEC v. Panuwat, filed against a biopharmaceutical executive for a practice that is colloquially known as shadow trading. Shadow trading involves buying or selling the securities of one company while in possession of confidential information of another closely correlated or economically linked company. The Panuwat complaint is the first instance of the SEC litigating a shadow insider trading case.

The SEC's complaint alleges that Matthew Panuwat, formerly a business development executive at Medivation Inc., misappropriated confidential information that he obtained in the course of his employment at Medivation that it was the target of an acquisition by Pfizer Inc.

Originally published on Law360 on August 27, 2021.