It survived motions to dismiss, summary judgment and now has survived a jury. The Securities and Exchange enlargement of insider trading, shadow trading, stuck through the case against Matthew Panuwat.
The SEC alleged that Mr. Panuwat traded in the stock of Incyte Corporation based on highly confidential information. Incyte was in a similar business to his employer, Medication, Inc. Mr. Panaway had learned about an impending announcement of Pfizer Inc.’s acquisition Medivation, Inc. He assumed that the stock price of Incyte would rise based on the valuation Pfizer placed on Medivation for the acquisition.
There is no doubt that knowledge of the Pfizer/Medivation transaction was material non-public information. Mr. Panaway clearly could not buy stock in Medivation ahead of the announcement. He didn’t.
Mr. Panawat took an aggressive approach to the Incyte share price. He purchased out-of-the-money options and lots of them. He purchased a majority of the daily volume of those options. The total purchase price was about half of his annual salary. He had not previously invested in Incyte. It was the biggest trade he had made. I’m sure the trades raised red flags at his brokerage which were reported to the SEC.
The jury decided that
- Mr. Panuwat had owed a duty of “trust, confidence or confidentiality” to Medivation as a result of his employment.
- Mr. Panuwat possessed nonpublic information as a result of his employment, that was material to Incyte.
- Mr. Panuwat purchased the Incyte options on the basis of that nonpublic information.
- Mr. Panuwat had “acted recklessly” in purchasing the options.
How do you deal with this from a compliance perspective? Would Incyte have been on blocked list for the investment bankers involved in the transaction?
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