SEC’s Expansive Take on Insider Trading Gets First Court Test

The typical example of insider trading looks something like this: an employee finds out her company is about to be acquired and buys its stock before the deal is announced. But what if the employee buys a rival company’s stock on the theory it, too, will rise?

That’s the question at stake in a trial that kicks off March 25 in San Francisco, where the US Securities and Exchange Commission is accusing a former biopharmaceutical executive of illegally trading a competitor’s stock.

Securities traders and lawyers are closely watching the case, the SEC’s first attempt to pursue so-called shadow trading. It also underscores how Congress has never explicitly defined insider trading, leaving courts to decide when the SEC oversteps its authority.

Source: SEC’s Expansive Take on Insider Trading Gets First Court Test