Facts of Salman v United States. How far down the line do you go? Is it — but the defendant here is not the insider, and — and we’ve been talking about the two brothers. So I don’t agree with that, Your Honor. There was no evidence he had any idea why, and as I believe Justice Sotomayor pointed out earlier, there were three different reasons at various points that information was disclosed. Well, correct, Justice Sotomayor, but that also was not information that was flowing from the insider to his brother. See Salman v. United States, 136 S. Ct. 899 (2016) (granting certiorari on the personal benefit question). Maher gave inside information to his brother, Michael Kara (Michael). We’re also going to have to show an intent to defraud, fraudulent intent, and we’re going to have to show willfulness in order to obtain a criminal conviction. Analysts talk to company insiders all the time, and it’s essential to the free flow of information to the marketplace that that occurs. ). At the end of the opinion where the Court precisely says that Secrist is not liable because he didn’t make any financial advantage, it goes on to say, nor did he make a gift of valuable information to Dirks. Become a member and get unlimited access to our massive library of In particular, it has had a lot of trouble — its members have had a lot of trouble determining when they can and can’t use market information of this sort. I take it you agree it doesn’t have to be purely financial? It would injure investor confidence, and it would contradict a 33-year-old precedent of this Court that was designed to announce the circumstances in which material nonpublic information possessed by an insider could not be used. (Slip Opinion) Syllabus NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. And it sounds to me, as you are saying — and you said this — whenever the tipper knows that the person, to him, he — who he gives the information might well use it to trade. So it’s irrelevant whether it’s a friend or family member? The personal benefit you say just has to be tangible and concrete, but it doesn’t have to be money, right? But that — that addresses whether or not there’s an initial breach. Read our student testimonials. So why — why make it part of the breach —. Don’t devise a scheme that does these things. And the reason for that is that the Court held that it would be a fraud to exploit the information for his personal trading profits because he had a duty to those shareholders and a duty to speak and either disclose or abstain from trading. If the issue sounds narrow, that’s because it is. It is not one nearly as simple as the government would like to have the Court believe. It does involve two people who were close friends, because ordinarily those are the circumstances in which people decide to risk criminal liability to give out inside information so that somebody else can profit. Appx. I’m stealing information to give a gift to somebody I know. This Court has only addressed this question once. — without any sense of who that recipient has to be. The Supreme Court recently rendered its much-anticipated decision in Salman v United States, 580 U. S. ____ (2016). There’s plenty — there’s a legion of cases I read for this — preparing for this argument where the government has said —. Are you going to suggest that tippees aren’t routinely prosecuted when tippers don’t know that they are going to trade? Isn’t that most naturally read to be either give me the money to pay this person back or give me information that lets me pay him back? I was referring to the discussion in the case about when a duty would arise. SALMAN v.UNITED STATES(2016) No. 886 (9th Cir. Some law schools—such as Yale, Vanderbilt, Berkeley, and the University of Illinois—even subscribe directly to Quimbee for all their law students. If you need this or any other sample, we One is classical insider trading where an insider who’s been given the information for a corporate purpose trades on it, or tips somebody else to trade on it. And you’re asking us essentially to change the rules in a way that threatens that integrity. The tippee 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. Is it an exact parallel? 15-628 . There is one case that involves a guy who was an insider who tipped his barber, and the district court said, well, the barber and the insider weren’t close enough, so that it didn’t count under Dirks. My point is that under Petitioner’s theory, when they are gifts, in other words when the information is given out to a romantic partner or to a struggling child who’s having difficulty making it, or as in this case a brother who at one point actually was offered money by the insider but turned it down and preferred the information, those things would not be criminal. And then there’s a subset of cases that we prosecute. The Court relied on its decision in Dirks v. Securities and Exchange Commission, 463 U.S. 646 (1983), which held that "that a tippee is exposed to liability for trading on inside information only if the tippee participates in a breach of the tipper's fiduciary duty." This would be deleterious to the integrity of the securities markets. The tipper in that situation is disclosing information in the context where he has made an express statement, and I’m assuming understandings between the two that the information would not be used. And I believe the marketplace pays a lot of attention to that. Tippee Liability — Salman v. United States The complex crime of insider trading — and the government’s abil-ity to prosecute those who would profit from confidential information — has relatively simple statutory roots: the Securities Exchange Act of 1934’s section 10(b), which bans the “use . Indeed, one could argue in the Dirks case that the insider there, Secrist, was breaching his fiduciary duty. No contracts or commitments. There are two theories of insider trading. So some of them may be gifts. I agree with the first, not with the second. Dirks adopted the Cady, Roberts formulation of the breach of duty, which to go back to it again, it is of the transmission of information that was made available only for a corporate purpose, for personal benefit, with the intent and knowledge that the individual is going to trade. The rule of law is the black letter law upon which the court rested its decision. 15-628 Argued: October 5, 2016 Decided: December 6, 2016. He’s no longer being pestered. Syllabus ; Opinion of the Court (Alito) Petitioner Bassam Yacoub Salman . You can try any plan risk-free for 30 days. So the person with the inside information has had a few drinks at the country club and is talking to some friends and discloses the inside information to — to the friends. This isn’t a revival of the information theory that was rejected in Dirks. Salman v. United States. Salman then used the information to trade in the securities of the company. X. And what makes it unlawful is that the insider is doing it for personal gain, whether trading himself and profiting on the information by doing so, or whether it’s by circumventing that rule, as discussed in Dirks, and essentially giving the information to someone else so that he can get a financial kickback. We’re talking about benefit and personal gain. United States Supreme Court. There were numerous occasions where Bayyouk and Michael Kara executed identical trades issued by Citigroup clients. If you give it to your — anyone in the world, and — whom you happen to know, and you believe that that person will trade on it, that is for a personal advantage. JUSTICE ALITO delivered the opinion of the Court. There is a difference between a breach of a duty of confidentiality with respect to information, and the kind of breach that was defined by the SEC in Cady, Roberts and incorporated into the law of securities fraud in this Court’s decisions in Chiarella and Dirks. It’s the exact opposite of using corporate information for corporate purposes. We need — we need to show knowledge in order to establish the breach of fiduciary duty. The Court should limit this crime to its core, as it did in Skilling, and that core is the insider’s abuse of confidential corporate information for personal profit. He knew that the information was coming out of Citigroup. Then click here. No, I wasn’t suggesting that there was — there are easy answers to the question of what contributes to the integrity of the market. You could have — you could have that view, but you also have the view that helping a relative is helping yourself. practice questions in 1L, 2L, & 3L subjects, as well as 16,600+ case in Salman v. United States, which addresses the “personal benefit” that a tipper must receive in an insider trading case.. (And speaking of recent cert. It might be, as in this case, a family member. And then it goes on to say, “When an insider makes a gift of confidential information to a trading relative or friend,” and then in the last paragraph of the opinion, where it’s really summing up everything that it’s done, the Court says, “The tippers received no monetary or personal benefit, nor was their purpose to make a gift of valuable information to the tippee.” So there’s a lot of language in Dirks which is very specific about, it’s not only when there’s a quid pro quo from the tippee to the tipper, but when the tipper makes a gift to the tippee, and in particular a relative or friend. Mr. Dreeben, I’m — I’m not sure that your solution is going to clarify much of this area, because now I think the fight is going to be over what was the reason that the tipper gave for giving the tip. He has to know it came from an insider in breach of a fiduciary duty and for personal benefit, as I’ve been articulating it.