Insider Trading Laws In Forex Trading In The U.s.: Guidance From San Antonio Attorneys – 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). Jones Day contributors Joan McKown, Josh Sterling, and Brian Rabbitt discuss enforcement trends, proposed rule changes, and increased cooperation among federal authorities.

Recent actions by federal agencies indicate that insider trading is a high-level enforcement priority. The SEC has launched one of the first cases to target so-called shadow trading by corporate executives. We’ll let you know where it stands.

Insider Trading Laws In Forex Trading In The U.s.: Guidance From San Antonio Attorneys

Insider Trading Laws In Forex Trading In The U.s.: Guidance From San Antonio Attorneys

Meanwhile, the SEC lost a case that could illustrate the limits of using data analytics in proving cases to judges and juries. We will also discuss how Dodd-Frank expanded the Commodity Futures Trading Commission, or CFTCs authority in matters of insider trading. And we’ll wrap up the discussion with a look at how the Department of Justice continues to cooperate with the SEC and now with the CFTC on these matters. It’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 McKown is a partner in Jones Day’s securities litigation and SEC enforcement practice. She 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. Prior to joining Jones Day, June was the longest-serving Chief Counsel in the Division of Enforcement at the SEC, where she played a key role in developing enforcement policies.

Financial Markets Practice Partner, Josh Sterling has 20 years of experience in the derivatives and securities markets, both as lead counsel to large companies 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. Prior to joining Jones Day, Josh was director of the CFTC’s Market Partners Division, which regulates the 3,300 banks, intermediaries and asset managers registered with the agency to trade derivatives in U.S. markets.

And Brian Rabbitt is a seasoned litigator with deep experience in 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 in high-profile, high-stakes, civil and criminal matters involving the DOJ, SEC, CFTC, state attorneys general and other government authorities. Prior to joining Jones Day, Brian was the Acting Assistant Attorney General for DOJs Criminal Division.

Thank you all. This is going to be a great, great topic. Interesting developments recently. We’ve got a lot to cover, so let’s get rolling and we’ll get straight to John with question number one. We’re going to talk about some recent SEC developments, John. Talk about SEC vs. Panwat. This includes the 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 that the SEC, David, has uncovered in some time. And basically the facts, what happened was Matthew Pinot, who at the time was the head of business development at a company called Medivation, a mid-sized oncology-focused biopharmaceutical company.

Anyway, Matthew bought short-term out-of-the-money stock options in Incyte Corporation, a corporation similar to Medivation. And it did so on August 22, 2016, just days before Pfizer announced that it would acquire Medivation at a significant premium. So his stock purchase was in Incyte Corporation, not the company he worked for, which employees are usually caught with insider trading, right?

But instead, it was another company that investment bankers focused on when they were in top-secret talks to acquire Medivation. Now, one thing that’s really interesting is that Medivation’s insider trading policy expressly disallowed its employees from using confidential information they obtained from Medivation to trade, not just Medivation’s securities. I, but in another publicly traded company.

Insider Trading Laws In Forex Trading In The U.s.: Guidance From San Antonio Attorneys

After Pfizer announced its acquisition of Medivation, Incyte’s stock price actually rose about 8%. So the SEC would say it covers all the touch points you need to cover for insider trading. It was material, it was non-public information that they allege Mr Panwat traded in breach of his duty to arbitrate. So very interesting case.

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So, John, he’s accused of breaking trade laws, but there’s also an internal thing. Did he break his own company policies or rules?

He did. Violation of the law is real trading and is a violation of… Insider trading is indeed charged by the SEC under general anti-fraud provisions. But the reason for pointing to the company’s policy is that it is part of their allegation that it breached its substantive duty to arbitrate.

It is obvious. Thanks for that. Let’s move on to Brian Rabbit. Brian, talk about where this case stands now and what the potential implications are for the SEC to prevail?

Thanks, Dave. John is right, this is a case that has received considerable attention among the securities defense bar over the past several months because it has raised new issues, in particular, because John stated whether a competitor Shares of the company may be traded. Breach of an employer’s duty, whether the information the defendant had was material to the trading at issue.

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So these are all the issues raised by the other commentators and the defendant in the motion to dismiss. Which was denied by the district court last week. Fairly recently, the district court ruled that the case can indeed proceed and will now proceed to discovery and possibly a trial down the road. And in denying the defendant’s motion to dismiss … the Court cited the relatively broad language of Section 10(b) of the Securities Exchange Act, which provides that any manipulation or fraud relating to any security Refers to the device.

Similarly, the broad language in the rule adopted by the SEC. And it held that information about one company, in this case the defendant’s employer, may actually be material to trading in the securities of another company. And the court also held that the SEC had properly pleaded that the many companies operating in the biotechnology space in which the defendant company is active could make that information more extensive. which he has, not only to his company, but also to competitors, such as the company whose securities he traded.

So it’s not too surprising that the motion to dismiss was denied and the case is set to move forward. This case raises some important questions going forward. If the SEC is able to either prevail at trial or reach a settlement with the defendant, it will raise questions about their strategy going forward, where they draw the line in such cases. , and then how it would apply the theory. Non-executives such as, for example, hedge funds or other funds that may have non-public information about a company, but are also actively trading in the market securities of related companies.

Insider Trading Laws In Forex Trading In The U.s.: Guidance From San Antonio Attorneys

They may not currently think they have material non-public information about these other companies, but as this case shows, there are times when the SEC will say, “Company A I have material information about Company B that may affect your business”. Where the SEC toes that line will be interesting to see if they are able to ultimately prevail in this case.

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Sure and it’s interesting. After decades of securities law, it seems to me, such a decision should have been made earlier. Yes, it wasn’t his company, but it’s a very small community. They all know what everyone else is doing. It seems that this kind of thing has gone on before. Brian, is there any case law or precedent that gives you an idea of ​​where this might come from or is it really new and unique?

Obviously there is case law around the fringes that informs some of the questions raised by the litigation, but in terms of the directly on-point cases, I think most would say that it depends on the facts. There is a relatively unique set of circumstances under which the SEC operates. New ground here in many respects. So for that reason, as John pointed out, it’s a very interesting case to watch.

It will definitely happen. And obviously we have a long way to go here, but John, given the progress in this case so far, what would you tell your clients right now about complying with the obligations associated with insider trading? Is there anything to take away at this point or let’s wait and see where it all pans out?

I won’t wait and see. I would think we’re in an era right now with a very aggressive SEC.

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