The U.S. Supreme Court decided to hear its first insider trading case in nearly two decades, an appeal seeking to clarify different rulings in the 2nd and 9th Circuits over what constitutes an inside trader as well as what is punishable under its definition.
The Supreme Court upheld the conviction against Bassam Salman, who received inside information from his brother-in-law, Maher Kara. Salman argued that Kara never received any pecuniary benefit for his actions; therefore, he was not guilty of insider trading. Instead, the court ruled that prosecutors do not have to show that the tipster received a concrete benefit – if the information gifted was provided to a friend or family member, that could be enough.
The judges in this Supreme Court insider trading case partially overturned the 2nd Circuit’s 2014 decision in U.S. v. Newman, which required that prosecutors prove the insider received a significant, potentially pecuniary benefit in exchange for their information.
The court closely followed their 1983 ruling in Dirks v. SEC, which held that a personal benefit can be inferred when giving information to a “trading relative or friend.” With this requirement out of the way, it is expected that prosecutors in the 2nd Circuit, which includes New York, will now have an easier time proving insider trading cases.
The ruling is not crystal clear: some experts believe what constitutes a “friend” was not explicitly addressed since the issue in this matter was resolved very narrowly – and with a familial tie. That lack of clarity could present issues in future cases seeking to challenge the Court’s recent ruling.
Contact a Securities Attorney Today
If you have received information that could be related to insider trading and are not sure if you can use it or act on it, contact a qualified attorney first.
The attorneys at Dimond Kaplan & Rothstein, P.A. can help guide you through the complex network of insider trading laws. Contact us today to schedule a free consultation or an appointment.
