Shadow Trading Theory and Congress
March 4, 2025 | The Review of Securities & Commodities Regulation
In 2024, a jury found a corporate insider liable under a new theory pursued by the SEC: “shadow trading,” in which an insider acts on material nonpublic information learned at the insider’s workplace to make a trade in an “economically linked” company — that is to say, one in the same or a similar industry. While this case, SEC v. Panuwat, signals a significant expansion of what conduct might be termed “insider trading,” it raises questions about what may happen to those in the United States who are most likely to possess industry-moving MNPI: the members of the U.S. Congress. In their recent article for The Review of Securities & Commodities Regulation, “Shadow Trading Theory and Congress,” Morvillo Abramowitz partners Brian A. Jacobs and Thomas A. McKay detail the extension of insider trading law that Panuwat represents, contrasting it to the stagnation that has marked attempts to expand accountability for U.S. lawmakers who trade on inside information. They also explore the methods some retail investors have devised to track and copy Congressional trades by harvesting public data, and how Panuwat’s shadow-trading theory could be applied to public officials in the future.
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