Insider Trading After the Salman Ruling

摘要

The Supreme Court in December 2016 decided its first insider trading case in nearly 20 years. In Salman v. United States, the court unanimously and swiftly upheld an insider trading conviction and simultaneously reaffirmed a long-standing principle about illegal tips amongfamily members.1 The case began with an insider sharing confidential information with his brother, who passed it along to a family friend who became the brother-in-law of the original insider. Both the brother and brother-in-law, as recipients of the tips, profited handsomely from trading on the inside information. The original insider never traded on the news and received no monetary benefit from providing the tips. Still, the insider and his brother both pleaded guilty to securities fraud for insider trading, and the brother-in-law was convicted of the same offense by a jury. The Supreme Court upheld the brother-in-law's conviction, despite a 2014 appellate court decision that had cast some doubt on the validity of insider trading prosecutions under somewhat similar facts. The Salman ruling initially appeared to be a significant, and perhaps even resounding, victory for the U.S. government and securities regulators in particular. However, in just the few months following that decision, several developments have raised questions about how sweeping an effect the Salman case might ultimately have. This paper will explain and analyze the Supreme Court ruling and its potential impact, as well as discuss unresolved issues and a pending case that might still undermine the strength of the governments victory.