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Supreme Court in Salman Says: “This One Is Easy,” Reaffirming Dirks and Rejecting Newman

December 6, 2016

The United States Supreme Court (Alito, J.) issued a unanimous decision today affirming the Ninth Circuit’s decision in Salman v. United States, an insider trading case concerning tippee liability.  The Court held that the personal benefit element in an insider trading case could be met solely by showing that a tipper had gifted confidential information to a trading friend or relative.  In arriving at that conclusion, the Court ruled that the Second Circuit had misconstrued the Supreme Court’s decision in Dirks v. SEC, 463 U.S. 646 (1983), when it held in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), that the personal benefit element could not be established based on a gift of confidential information to a trading friend or relative without additional evidence showing an exchange that is “objective, consequential, and represents at least a potential gain of a pecuniary or similarly valuable nature.”  

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