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Forex Trading And Laws Against Insider Trading In The U.s.: Attorney Analysis In Tennessee – Given recent high-profile insider trading cases, these issues remain enforcement priorities for Washington government agencies, including the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Department of Justice (DOJ). There is little doubt about that. Jones Day partners Joan McKown, Josh Sterling, and Brian Rabbitt discuss enforcement trends, proposed rule changes, and increased cooperation between federal agencies.
Recent actions taken by federal agencies demonstrate that insider trading remains a high-level enforcement priority. The SEC has launched one of the first lawsuits targeting so-called shadow trading by corporate executives. I’ll tell you where it is.
Forex Trading And Laws Against Insider Trading In The U.s.: Attorney Analysis In Tennessee
Meanwhile, the SEC lost a case that could demonstrate the limits of using data analytics in proving a case before a judge or jury. We also discuss how Dodd-Frank expanded the Commodity Futures Trading Commission’s (CFTC) authority in insider trading matters. And I’d like to conclude the discussion with a look at how the Department of Justice continues to work with the SEC and now he with the CFTC on these cases. There’s a lot of ground to cover. So please stay with us. I’m Dave Dalton. You’re listening to his JONES DAYTALKS®.
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Joan McKown is a partner in Jones Day’s securities litigation and SEC enforcement practice. She has over 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. Joan Prior to joining Her Day, Joan served as the longest-serving Chief Councilor of her SEC Enforcement Division and played a key role in establishing enforcement policy.
Financial Markets practice partner Josh Sterling has 20 years of experience in the derivatives and securities markets, both as a principal councilor for major corporations and as a senior federal financial regulator. He represents clients active in the derivatives markets in matters involving the U.S. Commodity Futures Trading Commission, the U.S. Securities and Exchange Commission, and various self-regulatory organizations. Prior to joining Jones Day, Josh served as Director of the CFTC’s Market Participant Division. The division regulates the 3,300 banks, intermediaries, and asset management companies registered with the CFTC to conduct derivatives transactions in U.S. markets.
Additionally, Brian Rabbitt is a seasoned litigation 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 regulatory practice, he works with clients facing high-profile, high-stakes civil and criminal matters involving the Department of Justice, SEC, CFTC, state attorneys general, and other government agencies. provides strategic counseling and representation. Prior to joining Jones Day, Brian served as an Assistant Attorney General in the Criminal Division of the Department of Justice.
Thank you everyone. This would be a great, great topic. Interesting recent developments. There’s a lot to cover. Now, let’s ask Joan question number one. Let’s talk about his recent SEC moves, Joan. Let’s talk about SEC vs. Panuwat. This includes so-called shadow trading. If possible, please provide background details.
Submission Of Voluntary Information Of Insider Trading
This is his one of the most interesting insider trading cases that has come to light in quite some time from the SEC, David. And basically what happened was Mr. Matthew Panuwat. At the time, he was a business development director at a company called Medivation. The company was a mid-sized biopharmaceutical company focused on oncology.
Anyway, Matthew bought his options on Medivation and his short-term out-of-the-money stock of Insight Corporation, which is a similar company. And he did it on August 22, 2016, just days before Pfizer announced it would acquire Medivation at a significant premium. So his stock purchases were made at Incyte Corporation, not the company he worked for. These are the companies whose employees are often caught in insider trading.
But instead, it was another company that investment bankers were eyeing as they held secret negotiations to buy Medivation. Now, one very interesting thing is that Medivation’s insider trading policy allows employees to use confidential information obtained at Medivation to trade not only Medivation’s securities, but also other publicly traded companies. This means that it was not explicitly allowed.
In fact, Insight’s stock price rose about 8% following the announcement of Pfizer’s acquisition of Medivation. So the SEC would say this meets all the necessary touchpoints for insider trading. It was material non-public information that they allege led Mr. Panuwat to transact in breach of his fiduciary duties to Medivation. It’s a very interesting case.
All About Insider Trading And Rule 10b5 1
So, Joan, he’s been charged with violating internal trading laws, but there’s also internal issues. Did he break his company’s policies or rules?
He did it. A violation of the law is an actual transaction that violates…insider trading is now actually prosecuted by the SEC under general anti-fraud provisions. But they point to company policy because that’s part of their claim that he breached his fiduciary duty to Medivation.
That’s obvious. Thank you. Let’s talk about Brian Rabbit. Brian, talk about the current status of this case and what the potential implications are if he wins the SEC’s case.
Thank you, Dave. Joan is right. This case has received considerable attention among securities attorneys in recent months because of the novel issues it raises. Specifically, because Joanne addressed whether trading in a competitor’s stock could be illegal. Breach of fiduciary duty to the employer, whether the information the defendant had was material to the transaction at issue.
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So these are all issues that other commenters and defendants raised in the motion to dismiss. In fact, a district court rejected it last week. So just recently, a district court ruled that the case can indeed proceed, and will now proceed to discovery and possibly trial. And in denying defendants’ motion to dismiss, the court cited the relatively broad language of Section 10(b) of the Exchange Act, which refers to any manipulative or deceptive means relating to securities transactions. did.
Similarly, the broad language of the rules adopted by the SEC. And he argued that information about one company, in this case the defendant’s employer, could actually be material to another company’s securities transactions. And the court also held that a small number of companies operating in this biotech field, in which the defendant’s company was active, could disclose the information obtained by the defendant to a wider audience than just the defendant’s company. It held that the SEC properly argued. Also to competitors, such as companies with which he traded securities.
Therefore, it is not too surprising that the motion to dismiss is denied and the case moves forward. This incident raises some important questions going forward. If the SEC succeeds at trial or obtains a settlement with the defendants, it raises questions about the SEC’s strategy moving forward, where it draws the line in cases like this, and how it applies its doctrine. Dew. For example, non-executives such as hedge funds and other funds who may hold material non-public information about a company may also be actively trading the market securities of their affiliates.
They may not believe they have material non-public information about other companies at this time, but as this case shows, the SEC states that “material information about Company A is “It may affect the transaction.” . It will be interesting to see where the SEC draws the line going forward and whether or not it is ultimately successful in this case.
What’s Insider Trading?
Of course. And that’s interesting. Having had securities laws for decades, it seems to me that this has been decided for a long time. Yeah, it wasn’t his company, but it’s a pretty small community. They all know what everyone else is doing. It appears that this type of issue has been going on for some time. Brian, is there any case law, or is there any case law that would give us an idea of where this might happen, or is this really something new and unique?
Obviously, there is case law in the margins that informs some of the questions raised by the lawsuit, but in terms of the immediate issue, this is a relatively unique set of facts that the SEC is stepping into. Most people would say that. This is new ground in many ways. So, as Joanne pointed out, this is a very interesting case to watch.
Certainly it will be. And obviously we’ve got a long way to go to get here, but Joanne, given how this case has played out so far, what would you say to your clients now that you have compliance responsibilities related to insider trading? At this point. Is there anything to be gained or should we wait for everything to be revealed?
I’m not going to wait and see. We know the SEC is in a very aggressive period right now.
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