On December 6, 2016, the Supreme Court issued a unanimous decision in Salman v. United States, holding that a tipper’s gift of confidential, inside information to a trading relative constituted a sufficient personal benefit to support an insider trading conviction. In Salman, the Supreme Court rejected any interpretation of the Second Circuit’s decision in United States v. Newman that would require proof that an insider received money, property, or something of tangible value in exchange for divulging confidential information, in order to establish criminal or civil liability. At the same time, the Court declined to adopt the Government’s view that a showing of any disclosure of confidential information by an insider for any non-corporate purpose is sufficient to prove a personal benefit to the tipper. While Salman will doubtless embolden prosecutors and Government enforcement lawyers in its rejection of Newman, the Supreme Court was clear that “the disclosure of confidential information without personal benefit” to the disclosing insider “is not enough.” It appears, therefore, that Federal district and appellate courts will be left with the task of parsing the particular facts of each case to determine whether a tipper’s “personal benefit” has sufficiently been established by the Government.

Background -

In Salman, the Supreme Court began by laying out the well-settled legal principle that so-called “tippees” of corporate insiders who violate their fiduciary duty of trust and confidence by disclosing confidential “insider” information may face criminal and civil liability for trading on such information. As the Court explained, a tippee who receives inside information “acquires the tipper’s duty to disclose or abstain from trading if the tippee knows the information was disclosed in breach of the tipper’s duty, and the tippee may commit securities fraud by trading in disregard of that knowledge.”