SCOTUS to Ponder Whether Insider Information Can Be a Gift

Chris Gaetano
Published Date:
Oct 5, 2016

When is it insider trading, and when it is just using information you've heard through the grapevine? That's the question the Supreme Court is set to consider in its first insider trading case in 20 years, according to Bloomberg.

While the court had been approached on this specific matter last year, it declined to hear the case, leaving in place a lower court ruling that, in order for something to count as insider trading, there needed to be a concrete benefit for the leaker.

The case before the SCOTUS involves a trader named Bassam Yacoub Salman, who made more than $1.5 million with a partner by using insider information to make trades. The tips came from a Citigroup investment banker who passed the information to his brother who, in turn, passed it onto Salman, his brother-in-law. In this case, the original leaker did not seek any sort of compensation or reward for the information, but simply shared it freely with family members.

While Salman's attorneys have argued that this means he cannot be prosecuted for insider trading, a San Francisco-based federal appeals court said that, even if the information was a gift, he can still be held responsible. Bloomberg noted that the case will be tougher for the defense due to the absence of Justice Scalia, who had advocated for a narrow interpretation of insider trading rules when he was alive. 

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