For the Defense - Volume 2, Issue 2 - 2017 - 29
Salman v.
United States:
The Supreme Court
Leaves More Questions
About Insider Trading
Law Than It Answers
Alexandra A.E. Shapiro and Daniel J. O'Neill1
I
n December 2016, the Supreme Court decided
Salman v. United States, its first insider trading
case in nearly twenty years.2 Defendants and
prosecutors had battled for decades over the
boundary between lawful and unlawful trading,
especially in "tipping" cases, where an insider (the
"tipper") does not personally trade, but instead
provides material nonpublic information to a
corporate outsider (the "tippee") who uses it to
trade. By taking the Salman case, the Court seemed
poised to provide some much needed definition.
The Salman opinion, however, decided only
one narrow issue and broke little ground. The
Court held that insider trading liability can attach
where one gives a "gift" of inside information to a
relative, without expecting any pecuniary benefit
in return. In so doing, the Court merely repeated
and reaffirmed language from an earlier decision.
The Court avoided the many difficult questions
that are sure to arise as lower courts grapple with
scenarios other than the brother-to-brother tip
presented in Salman.
The Personal Benefit Requirement
Salman arose out of a Circuit split over insider
trading law's personal benefit requirement,
which originated in the Supreme Court's 1983
decision in Dirks.3
Federal insider trading prosecutions are typically brought under Section 10(b) of the Securities
Exchange Act of 1934, which is a general anti-fraud
provision.4 It does not expressly prohibit the purchase or sale of securities on the basis of material
nonpublic information, let alone "tipping" inside
information to another.
The Supreme Court has consistently rejected
government efforts to read a "parity-of-information rule" into Section 10(b), holding that the
statute does not impose an unqualified prohibition on insider trading.5 Instead, the "fraud" for
Vol. 2, Issue 2 | For The Defense
29
Table of Contents for the Digital Edition of For the Defense - Volume 2, Issue 2 - 2017
For the Defense - Volume 2, Issue 2 - 2017 - 1
For the Defense - Volume 2, Issue 2 - 2017 - 2
For the Defense - Volume 2, Issue 2 - 2017 - 3
For the Defense - Volume 2, Issue 2 - 2017 - 4
For the Defense - Volume 2, Issue 2 - 2017 - 5
For the Defense - Volume 2, Issue 2 - 2017 - 6
For the Defense - Volume 2, Issue 2 - 2017 - 7
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