Law360 Publishes Akin Gump Article on Lessons Learned from SEC’s Enforcement of Shadow Trading

Law360 has published the article “New Shadow Trading Enforcement Lessons For Private Funds,” written by Akin Gump litigation partners Michael Asaro and Peter Altman and investment management partner Brian Daly. The article, which originated as an Akin Gump client alert, discusses a new effort by the Securities and Exchange Commission (SEC) “to convince the courts to expand the scope of the federal insider trading laws” via a complaint filed against a biopharmaceutical executive.

The case in question involves a practice that is often known as “shadow trading,” which the authors write “involves buying or selling the securities of one company while in possession of confidential information of another closely correlated or economically linked company.” Asaro, Altman and Daly observe that the case shows that “the SEC now views so-called shadow trading as another potential arrow in its enforcement quiver,” and that the result of the case could embolden the SEC “to pursue similar actions in the future, particularly in the private funds space.”

In addition, the authors say, the SEC’s Division of Examinations “may also be on the lookout for potential instances of shadow trading when conducting examinations of investment advisers who actively trade in relatively small sectors or subsectors with a limited number of players that could be viewed as economically linked.”

To read the article in its entirety, please click here.