Companies Rethink Insider Trading Policies After Novel SEC Win

Most S&P 500 companies write rules to stop employees from using confidential information to trade other businesses’ stock, but some are now thinking about scaling back their bans to avoid exposing their executives to new legal troubles.

That’s perhaps one unintended consequence for the Securities and Exchange Commission following its win in the first-ever trial over “shadow trading,” some lawyers say.

A key part of the SEC’s case against a former biopharma executive, Matthew Panuwat, was that his company’s policies prohibited him from buying any public company’s stock based on his insider knowledge about his own employer’s pending deal.

The ...