The SEC’s groundbreaking “shadow trading” case gained traction in January 2022 when the court declined to dismiss – or even narrow – the charges in its ruling on the defendant’s motion to dismiss. The decision came in SEC v. Panuwat, a litigated enforcement action the SEC filed against a former biopharmaceutical company employee who the SEC alleged traded in advance of an announced acquisition of his company. The wrinkle in Panuwat that differentiates it from other cases brought under the misappropriation theory of insider trading is that the defendant did not trade the securities of a company to which he owed a duty of trust and confidence, one that was the source of the material nonpublic information or even one that was involved in the transaction. Instead, he traded securities of a third party that was a peer company to the acquisition target. Although the facts of Panuwat are somewhat unique, the court’s decision may nonetheless embolden the SEC to investigate and bring more shadow trading enforcement actions. In the meantime, in a guest article, Sidley attorneys Ranah Esmaili, Stephen L. Cohen, Barry Rashkover and Austin Schlatter discuss ways private fund managers should be thinking about how to appropriately address risks associated with this new type of insider trading case, including through their compliance programs. For additional commentary from Esmaili, see “SEC Focus on Private Fund Managers: Examination Trends, Priorities and Deficiencies (Part Two of Two)” (Dec. 16, 2021); “Ways CCOs Are Approaching ESG in Light of Growing SEC Scrutiny” (Dec. 9, 2021); and “NYC Bar Framework for CCO Liability: CCO and Regulator Perspectives (Part Two of Two)” (Jul. 22, 2021).