A San Francisco Court held that an executive may be held liable for “shadow trading” namely trading in securities of a similarly situated competitor’s shares while in possession of insider information about his own company. The defendant was a senior director of business development at a pharmaceutical company bound by the company’s insider trading policy.
It is likely that insider trading in the US will in future include the situation where the information is disclosed with the expectation that the recipient would trade on it and the disclosure resembles trading by the insider, resulting in the gift of the profits to the recipient.
In United States v Martoma the insider
Insider trading is famously prohibited but prosecution is uncommon. The judgment in Zietsman and Another v Financial Services Board and Another has shown that this form of market abuse can be easy to detect and prove and the financial sanctions imposed are a strong deterrent besides the risk of criminal prosecution.
This case was an