White & Case recently published a survey of publicly filed insider trading policies. One of the topics addressed was the frequency with which policies addressed the issue of “shadow trading.” This excerpt describes the survey’s findings:

“Shadow trading” is the practice of an insider trading shares of another company that is “economically linked” to the insider’s company, while in possession of MNPI about the insider’s company. Companies are “economically linked” when the MNPI about the insider’s company could influence the market price of shares of the other company. This issue came to the fore in SEC v. Matthew Panuwat, when the SEC successfully prosecuted an insider trading case based on shadow trading.

Companies may want to reconsider the extent to which their insider trading prohibitions apply to securities of other companies, considering the potential reputational consequences of an insider trading action. 20% of companies surveyed specifically prohibit “shadow trading” by insiders, which was an increase (by 2%) from what we saw in our 2024 survey.

Note that most companies’ insider trading policies already explicitly apply to trading in the securities of the company’s customers, suppliers, and strategic partners etc., based on any information about such other companies learned through the individual’s employment. This concept is drafted more narrowly than the concept of shadow trading.

Other topics addressed in the survey include the prevalence and duration of quarterly blackout periods, persons subject to quarterly blackouts and preclearance policies, and how hedging and pledging, exchange funds, and gifts are addressed.

– John Jenkins