Supreme Court Clarifies Insider Trading Liability for Confidential Tips

December 7, 2016

The Supreme Court’s unanimous decision on December 6, 2016 in Salman v. United States clarified what constitutes a “personal benefit” for purposes of insider trading liability.

In its first merits ruling in an insider-trading case in two decades, the Court affirmed the Ninth Circuit’s holding that the personal benefit requirement may be met when an inside tipper simply gifts confidential information to a trading relative or friend. In so holding, the Supreme Court significantly narrowed a key aspect of the Second Circuit’s landmark insider trading decision in United States v. Newman, which had required prosecutors to prove that the tipper received something “of a pecuniary or similarly valuable nature”—a more difficult standard to meet.