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White Collar Update: Supreme Court Will Decide Reach of Insider Trading Law
Client Memorandum

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To be guilty of insider trading, a tipper of inside information must receive a “personal benefit” in exchange for his tips. On January 19, 2016, the Supreme Court granted certiorari in Salman v. United States to decide what the prosecution must prove to establish that a tipper received a “personal benefit.” In Salman, the Ninth Circuit held that a personal benefit is established when tips are made to a relative or friend as a gift. The Ninth Circuit disagreed with the Second Circuit’s opinion in United States v. Newman, which interpreted “personal benefit” to require more than a friendship or familial relationship between the tipper and tippee. In July 2015, the Department of Justice unsuccessfully petitioned the Supreme Court to hear and reverse Newman. United States Attorney Preet Bharara from the Southern District of New York has said that the Newman ruling will make it “very hard if not impossible to bring a certain kind of insider trading case.” Although the Supreme Court declined to hear Newman, that it has decided to hear Salman so soon after suggests that it wants to clarify the proper standard and that Salman provides the perfect opportunity to do so.