Forex Trading And Insider Trading Laws In Las Vegas: Attorney Guidance – Recent high-profile insider trading cases leave no doubt that these matters remain an enforcement priority for Washington agencies, including the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Department of Justice (DOJ). Are. Jones Day partners Joan McKeown, Josh Sterling and Brian Rabbitt talk about enforcement trends, proposed rule changes and increasing collaboration between federal authorities.
Recent actions taken by federal agencies show that insider trading remains a high-level enforcement priority. The SEC has launched one of the first cases targeting so-called shadow trading by a corporate executive. We’ll tell you where he is.
Forex Trading And Insider Trading Laws In Las Vegas: Attorney Guidance
Meanwhile, the SEC lost a case that could clarify the limits of using data analytics in proving cases in front of judges and juries. We’ll also talk about how Dodd-Frank expanded the authority of the Commodity Futures Trading Commission, or CFTC, in insider trading cases. And we’ll conclude this discussion with a look at how the Department of Justice continues to cooperate with the SEC and now the CFTC on these matters. That’s a lot to cover. So stay with us. I’m Dave Dalton, you’re listening to Jones Day Talks®.
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Joan McKeown is a partner in Jones Day’s securities litigation and SEC enforcement practice. He has more than 30 years of experience in Securities and Exchange Commission enforcement and financial regulatory matters, including investigations, examinations, internal investigations and disputes throughout the United States. Before joining Jones Day, Joan was the longest-serving Chief Counsel in the Enforcement Division at the SEC, where she played a key role in setting enforcement policies.
Josh Sterling, Financial Markets Practice Partner, has over 20 years of experience in the derivatives and securities markets, both as the Chief Counsel of major firms and as a senior federal financial regulator. He represents clients who are active in the derivatives markets with matters before the US Commodities Futures Trading Commission, the US Securities and Exchange Commission and various self-regulatory organizations. Before joining Jones Day, Josh was the Director of the CFTC’s Market Participants Division, which regulates the 3,300 banks, intermediaries and asset managers registered with the agency to trade derivatives in the US markets.
And Brian Rabbitt is a seasoned attorney with deep experience handling complex litigation and sensitive investigations in enforcement matters at the highest levels of government. A partner in the firm’s Government Regulation practice, he provides strategic counsel and representation to clients facing high-profile, high-stakes, civil and criminal matters involving the DOJ, SEC, CFTC, state Attorneys General, and other government officials. Before joining Jones Day, Brian was the Acting Assistant Attorney General for the DOJ’s Criminal Division.
Thanks to all of you. This is going to be a great, great topic. Recent interesting developments. We have a lot to cover, so let’s go ahead and go straight to Joan with question number one. We’re going to talk about some recent SEC developments, Jon. Talk about SEC vs. Panuvat. This includes so-called shadow trading. Give us some background details if you can.
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This is one of the most interesting insider trading cases the SEC has brought forward in recent times, David. And basically the facts, what happened was Matthew Panuwat, who at the time was the head of business development at a company called Medivation, which was a medium-sized oncology focused biopharmaceutical company.
Anyway, Matthew bought short-term out-of-the-money stock options in Incyte Corporation, the same corporation as Medivation. And they did so on August 22, 2016, just days before Pfizer announced that they would acquire Medivation at a significant premium. So his stock purchase was in Incyte Corporation, not the company where he worked, whose employees typically get caught in insider trading, right.
But instead, it was another company that investment bankers were focused on when they were in highly confidential talks regarding the acquisition of Medivation. Now, one thing that is really interesting is that Medivation’s insider trading policy clearly prohibits their employees from using confidential information obtained at Medivation to trade not only in Medivation’s securities, but in any other publicly traded company. Does not allow to do.
After Pfizer announced its acquisition of Medivation, Insight’s stock price actually increased by about 8%. So the SEC will say that this meets all the contact points you need to complete for insider trading. It was material, it was non-public information that they accused Mr Panuwat of doing business in breach of his fiduciary duty to Mediation. So this is a very interesting case.
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So, Joan, she’s accused of breaking internal trading laws, but there’s also an internal thing. Did he break his own company policies or rules?
He has done. Violating the law is real trading and that violates… insider trading is actually charged by the SEC under the general anti-fraud provisions currently in place. But the reason they point to company policy is because it’s part of their allegation that they breached their fiduciary duty to Medivation.
Understand. thank you for that. Let’s move on to Brian Rabbit. Brian, talk about where this case stands now and what the potential impacts would be if the SEC prevails in this?
Thanks, Dave. Joan’s right, this is a case that has attracted considerable attention among the securities defense bar over the past several months because it raises new issues, in particular, because Joan mentioned whether a competing company’s shares Doing business can be a risky affair. Breach of fiduciary duty to an employer, whether the information the defendant possessed was material to the business at issue.
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So these are all issues that other commentators and defendants raised in the motion to dismiss. In fact, last week the district court had rejected it. So recently the district court ruled that the case can indeed proceed and it will now proceed to discovery and potentially further hearings. And in denying defendants’ motion to dismiss … the court cited the relatively broad language of Section 10(b) of the Securities Exchange Act, which refers to any manipulative or deceptive device relating to any security.
Similarly, the broad language in the rule adopted by the SEC. And he recognized that information about one company, in this case the defendant’s employer, might actually be material to trading in the securities of another company. And the court also held that the SEC had adequately argued that the very small number of companies that were operating in this biotechnology sector in which defendant’s company was active posed a threat not only to his company, but to his Could have presented the content more widely. Even to competitors, such as a company in whose securities it traded.
So it is not too surprising that the motion to dismiss was denied and the case is set to proceed. This case raises some important questions going forward. If the SEC is able to succeed in the lawsuit or reach a settlement with the defendants, it will raise questions about their strategy moving forward, where they draw the line in such cases, and how it will then apply the doctrine of non- Executives such as, for example, hedge funds or other funds that may have material non-public information about a company, but may also actively trade in the market securities of related companies.
They may not currently think that they have material non-public information regarding those other companies, but as this case shows, there will be certain times when the SEC will say, “Material information about Company A is available to Company B.” ” that may affect your business. Where the SEC draws that line going forward will be interesting to see if they are ultimately able to prevail in this case.
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Sure. And this is interesting. It seems to me that after decades of securities law, something like this should have already been decided. Yeah, it wasn’t their company, but it’s a very small community. They all know what everyone else is doing. It seems that this type of case may have progressed before. Brian, is there any case law or is there any precedent that gives you an idea of where this might come up or is it really new and unique?
There is obviously case law in the margins that informs some of the questions raised by the litigation, but in terms of straight point cases, I think most people would say this is a relatively unique set of factual circumstances and the SEC is stepping in. In many ways this is new ground here. So for that reason, as Joan pointed out, this is a very interesting case to look at.
This will definitely happen. And obviously we have a long way to go to get here, but Jon, given the developments in this case so far, what would you tell your clients right now with the compliance responsibilities associated with insider trading? Is there anything to take away at this point or should we wait and see where everything pans out?
I won’t wait and see. I would realize that we are in a very aggressive SEC era right now.
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