(Reuters) – The U.S. Securities and Exchange Commission can pursue a first-of-its-kind insider trading case accusing a former pharmaceutical company executive of trading in a competitor’s stock ahead of a merger, a judge in San Francisco ruled.
U.S. District Judge William Orrick denied Matthew Panuwat’s motion to dismiss the lawsuit on Friday. The regulator alleges Panuwat, a former business development executive at Medivation Inc, used internal knowledge of Pfizer Inc’s plan to buy Medivation to bet on the stock of fellow pharmaceutical company Incyte Corp in 2016.
An attorney for Panuwat did not immediately reply to a request for comment. He had argued the case improperly stretched insider trading law.
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The case against came after researchers coined the term “shadow trading” to describe the phenomenon of insiders with non-public information trading in competitors’ or supply chain partners’ stock to evade insider trading prohibitions.
On Friday, the judge found that broad anti-fraud laws provide a basis for the SEC’s allegations that Panuwat breached a duty to his company, which had prohibited employees from using confidential information to trade.
The case is SEC v. Panuwat, U.S. District Court, Northern District Of California, No. 21-06322.
For Panuwat: Jack DiCanio of Skadden, Arps, Slate, Meagher & Flom
For the SEC: Marc Katz, David Zhou and Tracy Combs
Read more:
Exec accused of ‘shadow trading’ says case stretches law
SEC accuses pharma exec of ‘shadow trading’
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