Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...
Aug. 2 — A corporate insider receives a “personal benefit” by making a gift of confidential information to a trading friend or relative, government lawyers argued ( Salman v. United States, U.S., No. 15-628, 8/1/16 ).
The insider doesn't have to realize a pecuniary gain from sharing the information for insider trading purposes, they told the U.S. Supreme Court in a brief filed late Aug. 1.
Under that test, defendant Bassam Yacoub Salman properly was convicted of insider trading, Justice Department and Securities and Exchange Commission lawyers said: he knowingly traded on information he knew the insider disclosed as a personal gift to his—the insider's—brother and not for any corporate purpose.
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. In a setback for federal enforcers, the Supreme Court refused to review the ruling (193 SLD, 10/6/15)..
In the Salman case, Maher Fayez Kara, formerly an investment banker at Citigroup Global Markets Inc., tipped his brother Mounir Kara to inside information about transactions involving Citi clients. Mounir Kara, in turn, tipped Salman, and Salman traded on the inside information, prosecutors said.
Salman was convicted after a jury trial and a year ago, the Ninth Circuit affirmed (130 SLD, 7/8/15). It said prosecutors presented direct evidence that Maher Kara's tips to his brother were intended “as a gift of market-sensitive information” and that that was enough to show that Maher Kara received a “personal benefit” for the disclosures. Earlier this year, the justices agreed to review the decision (12 SLD, 1/20/16).
In May, Salman told the high court that for insider trading liability, a corporate insider who conveys confidential information has to do so for a concrete monetary benefit.
The Justice Department and the SEC didn't agree.
Where, as in this case, “when the objective facts show that information was provided as a gift for securities trading, and no corporate purposes exists for the disclosure, the personal-benefit test is satisfied,” the government wrote.
To contact the reporter on this story: Phyllis Diamond in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Susan Jenkins at email@example.com
To see the brief, go to http://src.bna.com/hlN
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 firstname.lastname@example.org.
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 email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)