Securities Law Daily provides daily coverage of developments in the regulation of federal, state, and international securities and futures trading, with objective coverage of the...
Sept. 9 — Does a person who leaks inside information have to receive a tangible personal benefit for someone who trades on the tip to be liable for insider trading?
The U.S. Supreme Court is poised to hear debate on the topic Oct. 5, two days after it returns for its 2016-2017 session.
The occasion marks the first time the justices will tackle an insider-trading dispute in almost two decades. However they resolve the issue, their decision will have a major impact on insider-trading enforcement for years to come.
The personal benefit controversy arose in late 2014 when the U.S. Court of Appeals for the Second Circuit in United States v. Newman vacated the insider trading convictions of two former hedge fund managers. It said the government didn't prove that the two men—both downstream tippees—knew the information was disclosed by an insider in exchange for a personal benefit, i.e., “at least a potential gain of a pecuniary or similarly valuable nature.”
In a setback for federal enforcers, the Supreme Court refused to review the ruling (193 SLD, 10/6/15).
In January, however, the justices agreed to take up a Ninth Circuit ruling affirming the insider conviction of Bassam Yacoub Salman, who traded on tips from the brother of a former Citigroup investment banker ( Salman v. United States, No. 15-628) (130 SLD, 7/8/15). The Ninth Circuit applied a looser personal-benefit standard, saying the banker's tips to his brother were intended “as a gift of market-sensitive information,” and that that was enough to show that the banker received a “personal benefit” for his disclosures.
When the court returns in October, it also will face certiorari petitions by several high-profile defendants. Former Texas tycoon R. Allen Stanford wants the justices to review the Fifth Circuit's decision affirming his conviction for master-minding a decades-long $7 billion Ponzi scheme ( Stanford v. United States, No. 15-1490) (119 SLD, 6/21/16). He claims the government violated his Sixth Amendment right to counsel by seizing all of his assets before trial “without any showing that those assets were tainted.”
Former American International Group Inc. Chairman Maurice “Hank” Greenberg is asking the U.S. Supreme Court to take up the New York Court of Appeals' allegedly erroneous decision allowing the state to proceed with a fraud suit against him ( Greenberg v. People, No. 16-284) (107 SLD, 6/3/16).
The New York Attorney General's lawsuit is preempted by a 1996 federal statute that defines fraudulent practices more narrowly than the broad state law under which he was charged, Greenberg said in an Aug. 30 certiorari petition. Among other differences, he argued, the state law doesn't require a showing of “scienter”—culpable intent.
The AG's response is due Oct. 3.
Other pending certiorari petitions include:
The Stanford, Cyan and Stiefel Labs cases are slated for conference Sept. 26. Responses in Sovereign Wealth Fund Sambruk-Kazyna and DeKalb County Pension Fund are due Sept. 12 and Sept. 14, respectively.
To contact the reporter on this story: Phyllis Diamond in Washington at email@example.com
To contact the editor responsible for this story: Susan Jenkins at firstname.lastname@example.org
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)