Could New Legislation on Insider Trading be on its Way?

The SEC and DOJ have long prioritized insider trading prosecutions. Moreover, insider trading cases frequently involve parallel investigations in which the SEC and DOJ share information and coordinate efforts to collect evidence in support of civil and criminal litigation. Despite some setbacks that prosecutors have faced in recent years as insider trading case law has evolved, there is no sign that either the SEC or DOJ is backing down from vigorously enforcing the law prohibiting insider trading. We have previously blogged about the recent case law changes and their effect on civil and criminal investigations. The Bharara Task Force on Insider Trading was created in late 2018 and released its report on January 27, 2020.

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DOJ Drops Insider Trading Charges After Guilty Plea Found Insufficient

Last week, the Southern District of New York dropped its prosecution of Richard Lee, a former portfolio manager at SAC Capital who, in 2013, entered a guilty plea to trading on material nonpublic information that he gained from corporate insiders. The court recently ruled that Mr. Lee’s guilty plea must be vacated to conform with the ruling in United States v. Newman, 773 F.3d 438, 450-51 (2d Cir. 2014), abrogated on other grounds by Salman v. United States, 137 S. Ct. 420 (2016). Newman held that a tippee who traded on material nonpublic information must have knowledge that the insider acted for personal benefit in disclosing the information. Thus, in 2017, Mr. Lee moved to withdraw his guilty plea on the grounds that (1) he was innocent; (2) had he known additional information, he would not have pleaded guilty; and (3) his guilty plea was insufficient in light of Newman. Rejecting the first two, the court agreed with Mr. Lee that his guilty plea was insufficient under Newman.

Concurrent to his 2013 guilty plea with the DOJ, Mr. Lee also reached an agreement with the SEC. SEC v. Lee, 13-CV-05185 (RMB) (S.D.N.Y.). On September 12, 2013, the Court in that matter entered a judgment against Lee, enjoining him from future violations of the securities laws, and ordered him to pay disgorgement of $130,144.91, prejudgment interest of $57,777.23, and a civil penalty of $130,144.91. Mr. Lee was also barred from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal adviser, transfer agent, or nationally recognized statistical ratings agency.

Prosecutors filed the request to dismiss on the basis that the evidence is now 10 years old and that Mr. Lee settled with the SEC. More specifically, the prosecutors explained that dismissing the pending charges was “in the public interest,” considering that “(1) the amount of time that has passed since the trades at issue and the resulting difficulty in securing evidence related to elements of the charged offenses; and (2) the SEC’s judgment and bar against Lee.”

Split Second Circuit Affirms Insider Trading Conviction While Rejecting Newman’s “Meaningfully Close Personal Relationship” Requirement

On August 23, 2017, the United States Court of Appeals for the Second Circuit affirmed an insider trading conviction against a portfolio manager, and in doing so, held that the “meaningfully close personal relationship” requirement set forth in the Second Circuit’s landmark decision, United States v. Newman, to infer personal benefit “is no longer good law.”


Matthew Martoma (“Martoma”) managed an investment portfolio at S.A.C. Capital Advisors, LLC (“SAC”) that focused on pharmaceutical and healthcare companies. His “conviction[] stem[s] from an insider trading scheme involving securities of two pharmaceutical companies, Elan Corporation, plc (“Elan”) and Wyeth, that were jointly developing an experimental drug called bapineuzumab to treat Alzheimer’s disease.” During the development of bapineuzumab, Martoma arranged for consultation visits paid by SAC with two doctors who were working on the clinical trial. One doctor was the chair of the safety monitoring committee for the clinical trial and provided Martoma with “confidential updates on the drug’s safety that he received during meetings on the safety monitoring committee.” The other doctor, a principal investigator on the clinical trial, provided Martoma with “information about the clinical trial, including information about his patients’ responses to the drug and the total number of participants in the study.”

In July 2008, one of these two doctors was selected to present the results of “Phase II” of the clinical trial at the International Conference on Alzheimer’s Disease, but prior to the conference, the doctor identified “‘two major weaknesses in the data that called into question the efficacy of the drug as compared to the placebo.” Martoma spoke with this doctor on two occasions, including an in-person meeting where the doctor shared with Martoma “the efficacy results and discussed the data with him in detail.” Martoma subsequently spoke with the owner of SAC and prior to the public announcement of the efficacy results, “SAC began to reduce its position in Elan and Wyeth securities by entering into short-sale and options trades that would be profitable if Elan’s and Wyeth’s stock fell.” When the final results from the clinical trial were publicly presented approximately a week later, Elan’s and Wyeth’s share prices declined and the “trades that Martoma and [SAC’s owner] made in advance of the announcement resulted in approximately $80.3 million in gains and $194.6 million in averted losses for SAC.”

The Appeal

In February 2014, following a four-week jury trial, Martoma was convicted of one count of conspiracy to commit securities fraud in violation of 18 U.S.C. § 371 and two counts of securities fraud in connection with an insider trading scheme. Martoma appealed his conviction primarily on two grounds—“that the evidence presented at trial was insufficient to support his conviction and that the district court did not properly instruct the jury in light of the Second Circuit’s decision in United States v. Newman, issued after Martoma was convicted.” Specifically, Martoma argued that there was no “meaningfully close personal relationship” as set forth in Newman between him and the doctor, and that the doctor did not receive any “‘objective, consequential . . . gain of a pecuniary or similarly valuable nature’ in exchange for providing Martoma with confidential information.” Martoma also argued that the jury instructions were inadequate because they “did not inform the jury about the limitations on ‘personal benefit’” as set forth in Newman.

The majority summarily rejected Martoma’s sufficiency of evidence argument finding that Martoma was a “frequent and lucrative client” of the doctor who was paid $1,000 for approximately 43 consulting sessions where the doctor regularly disclosed confidential information. Relying on Newman, the court noted that “‘the tipper’s gain need not be immediately pecuniary,’ and . . . that ‘enter[ing] into a relationship of quid pro quo with [a tippee], and therefore hav[ing] the opportunity to . . . yield future pecuniary gain,’ constituted a personal benefit giving rise to insider trading liability.” The court held that even though the doctor was not paid for the two consultations on the efficacy results, under the pecuniary quid pro quo theory, a “rational trier of fact could have found the essential elements of the crime [of insider trading] beyond a reasonable doubt.”

The crux of the decision lies in Martoma’s challenge to the adequacy of the lower court’s jury instruction. To complicate matters, during the pendency of the appeal, both the Second Circuit and the Supreme Court issued decisions that weighed heavily into the court’s analysis. First, in United States v. Newman, which we previously reported on here, the Second Circuit held, in relevant part, that a trier of fact could not infer that a tipper personally benefitted from disclosing information as a gift unless that gift was made to someone with whom the tipper had a “meaningfully close personal relationship.” This requirement was derived from an example the Supreme Court provided in Dirks v. S.E.C., 463 U.S. 646 (1983), where an insider is deemed to have personally benefited when disclosing inside information as “a gift . . . to a trading relative or friend.” Subsequently, in Salman v. United States, which we previously reported on here, the Supreme Court found as obvious that an insider personally benefits from trading on inside information and then giving the proceeds as a gift to his brother, and an insider “‘effectively achieve[s] the same result by disclosing the information to [the tippee], and allowing him to trade on it,’ because ‘giving a gift of [inside] information is the same thing as trading by the tipper followed by a gift of the proceeds.’”

Acknowledging that the discussion of gifts in both Dirks and Salman were “largely confine[d]” within the context of gifts to trading relatives and friends, and that the Supreme Court in Salman did not explicitly hold that gifts to anyone, including non-relatives and non-friends, can give rise to the personal benefit necessary to establish insider trading liability, the Second Circuit determined that “the straightforward logic of the gift-giving analysis in Dirks, strongly reaffirmed in Salman, is that a corporate insider personally benefits whenever he ‘disclos[es] inside information as a gift . . . with the expectation that [the recipient] would trade’ on the basis of such information or otherwise exploit it for his pecuniary gain.” Against this backdrop, the Second Circuit held that:

[A]n insider or tipper personally benefits from a disclosure of inside information whenever the information was disclosed “with the expectation that [the recipient] would trade on it,” and the “disclosure resemble[s] trading by the insider followed by a gift of the profits to the recipient,” whether or not there was a “meaningfully close personal relationship” between the tipper and tippee.

In other words, the Second Circuit “reject[ed], in light of Salman, the categorical rule that an insider can never personally benefit from disclosing inside information as a gift without a ‘meaningfully close personal relationship.’” Coupled with the fact that it had already determined the evidence was sufficient to support Martoma’s conviction, the Second Circuit determined that the jury instruction pertaining to personal benefit was not obviously erroneous, and even if it were, such an error did not impair Martoma’s rights.

The Dissent

Of note in an already notable decision is the scathing dissent, which is lengthier than the majority opinion, authored by Judge Pooler. Judge Pooler opined that by expanding the recipient of a gift from a “trading relative or friend” as set forth in Dirks to any person, the “majority strips the long-standing personal benefit rule of its limiting power.” Judge Pooler expressed particular disagreement with the majority’s application of Salman to overturn Newman’s “meaningfully close personal relationship” requirement because the Supreme Court explicitly overturned the second holding in Newman that had required a showing of a monetary or other gain in conjunction with a gift of information to a trading relative or friend, but left untouched the first holding that there must be a “meaningfully close personal relationship” to infer a personal benefit from a gift. She states:

In the past, we have held that an insider receives a personal benefit from bestowing a “gift” of information in only one narrow situation. That is when the insider gives information to family or friends—persons highly unlikely to use it for commercially legitimate reasons. Today’s opinion goes far beyond that limitation, which was set by the Supreme Court in Dirks, received elaboration in this Court’s opinion in Newman, and was left undisturbed by the Supreme Court in Salman. In rejecting those precedents, the majority opinion significantly diminishes the limiting power of the personal benefit rule, and radically alters insider-trading law for the worse.


This ruling unwinds the landmark Newman decision, which limited the circumstances that a gift of information could be inferred as receipt of a personal benefit, but how long the ruling will remain in effect is unclear. It is possible that the Second Circuit will review the case en banc, or that the Supreme Court will grant certiorari should Martoma seek it, particularly in light of the fact that Newman’s “meaningfully close personal relationship” requirement was not an issue in front of the Supreme Court in Salman since the case involved two brothers. For the time being, however, the decision allows prosecutors to go forward with insider trading cases that may have been previously foreclosed under Newman’s “meaningfully close personal relationship” requirement.

SEC Insider Trading Update: A New Remedy, A Governmental Insider Case, & An Emboldened SEC After Salman

The Securities and Exchange Commission (SEC) recently announced two significant insider trading cases. These pronouncements serve as reminders that the new Commission under the Trump Administration, while pursuing its agenda, will continue to ensure that the financial industry is “playing by the rules.” In addition, these particular cases involve: the SEC using a remedy that it had not used before in this context; and the SEC continuing to investigate and bring cases that involve governmental “insider” information.

Regarding the SEC extending the use of a “tool” from its remedy arsenal to the insider trading area, last week the SEC entered into a settlement with a billion-dollar hedge fund and its founder, which included an undertaking for an independent compliance consultant. The novel extension of this remedy to an insider trading settlement prompted the Acting Enforcement Division Director to issue a statement. In addition to the typical insider trading settlement terms, this settlement included an undertaking for an on-site “Compliance Consultant” to monitor and review for any future potential violative conduct through 2022. The SEC describes this process as “onsite monitoring by an independent compliance consultant with access to their electronic communications and trading records.” The SEC historically seeks independent consultants and monitors in other types of cases, including matters involving public companies with material accounting and control weaknesses. More recently, however, regulators have expanded the use of this remedial undertaking. For example, this past year, the Commodity Futures Trading Commission extended the use of independent monitors to a manipulative trading settlement.

Various publications hailed this insider trading settlement as a victory for individuals facing insider trading investigations. However, that perspective may be short-sighted. The SEC’s use of this remedy may allow it to “lower the bar” for insider trading investigations knowing that it may be able to obtain settlements such as this which do not result in a suspension or bar. While the avoidance of the suspension or bar is of course paramount to individuals, an undertaking such as this involves an invasive-type relationship with a third party who – while “independent” – may have an allegiance to a regulator or a court. Further, the defendant/respondent firm almost always bears the full cost of the services provided by the consultant or monitor. It’s not a stretch to describe these costs as additional/hidden monetary penalties that over a period of years (through 2022 for this matter) may increase to hundreds of thousands of dollars or more. Thus, while this may be a positive result for the head of this hedge fund, it may be an unfortunate development for individuals and entities whom the SEC investigates in the future who – before this settlement – the SEC may not have considered charging.

Turning to another matter, the other day, the SEC charged a former government employee, turned political intelligence consultant with insider trading. The SEC has historically brought insider trading cases involving “inside” governmental information; however these cases are not as common as tipper-tippee or misappropriation cases involving individuals associated with firms or public companies. In the SEC’s release, the Acting Director of the Enforcement Division provided this message, “As alleged in our complaint, a federal employee breached his duty to protect confidential information by tipping a political consultant who then passed along those illegal tips.” She further warned, “There’s no place on Wall Street or in our government for such blatant misuse of highly confidential information.” Further indicating the aggressive approach to this governmental insider trading matter, in a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced related criminal charges. Thus, as stated above, at the start of this new Commission under the Trump Administration, the SEC remains creative and aggressive in its pursuit of insider trading violations.

In the not too distant past, the ruling by the Second Circuit Court of Appeals in U.S. v. Newman indicated a possible chilling effect on the government’s pursuit of insider trading cases and the various creative and aggressive strategies that it had started to apply in the decade prior. Less than six months ago, however, the U.S. Supreme Court sided with prosecutors in Salman v. U.S. The resulting opinion returned us to the standard first espoused in Dirks v. SEC in 1983. The Dirks opinion has been subjected to various criticisms over the decades from all sides for vagueness, amongst other issues. One of the collateral results of this vagueness is that it has allowed for creative and aggressive investigative and prosecutorial tactics that the government uses to investigate and charge insider trading cases. The timing of these two SEC cases and the recent issuance of the Salman opinion may be more than coincidental – as we may be witnessing an SEC emboldened by this Supreme Court ruling.

Supreme Court Reaffirms Dirks and Tosses Prosecution a Win

In Salman v. United States, 580 U.S. __ (2016), the U.S. Supreme Court upheld Bassam Salman’s conviction, giving prosecutors a win on the first insider trading case to be heard by the Court in nearly two decades. The unanimous decision, written by Justice Samuel Alito, is short and to the point. The Court reaffirmed the continued validity of Dirks v. S.E.C., 463 U.S. 646 (1983), and determined that a tipper receives a personal benefit by providing insider information to a “trading relative or friend.”

In Dirks, the Court ruled that a tippee’s liability for trading on inside information hinges on whether the tipper breached a fiduciary duty by disclosing the information. The fiduciary duty is breached when the insider will personally benefit, directly or indirectly, from his disclosure. In Salman, the Supreme Court stated that the benefit did not have to be money, property, or something of tangible value, because “giving a gift of trading information is the same thing as trading by the tipper followed by a gift of the proceeds.”

This decision resolved a circuit split between the Ninth Circuit, which had affirmed Salman’s conviction, and the Second Circuit, which ruled in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), that prosecutors had to prove that insiders received monetary or some sort of valuable benefit in exchange for disclosing information in order to convict the tippee who had used said information. The Supreme Court found that “[t]o the extent the Second Circuit held that the tipper must also receive something of a ‘pecuniary or similarly valuable nature’ in exchange for a gift to family or friends, Newman 773 F.3d at 452, we agree with the Ninth Circuit that this requirement is inconsistent with Dirks.” Yet, the Supreme Court seemed careful to imply that some portions of Newman remain good law, such as the requirement that the tippee knows the insider received a personal benefit from providing the inside information.

Despite, or perhaps because of the brevity of the opinion, questions still remain about what exactly is a benefit to the tipper. Clearly, familial connections or close friendships between the tipper and the tippee mean that prosecutors do not have to prove a specific pecuniary benefit occurred for the tipper, but would the same hold true if the tippee was a neighbor? Or, as the Second Circuit opined in Newman, an acquaintance from church or business school? The Supreme Court dodged these questions and more by deciding Salman narrowly on the facts, a model of judicial restraint in the wake of far ranging decisions like McDonell v. United States that essentially rewrote how prosecutors handle corruption cases.

The Supreme Court Appears Poised to Reaffirm Dirks v. SEC and Maintain Current Insider Trading Rules

For the first time in two decades, the Supreme Court heard oral argument in a case that could change the landscape for the government’s pursuit of insider trading violations. In Salman v. United States (Dkt. No. 15-628), the Court reviewed the government’s burden of proof when it prosecutes for insider trading. Specifically, the primary issue involves whether Salman’s “tipper” had received the kind of “personal benefit” required by precedent to hold Salman criminally liable for insider trading. The United States Court of Appeals for the Ninth Circuit affirmed Salman’s conviction. However, just two years ago, the United States Court of Appeals for the Second Circuit overturned the convictions of several insider traders because the government failed to establish that the insiders had received “a potential gain of a pecuniary or similar valuable nature.” In other words, the Second Circuit rejected governmental theories where insider tips were given to friends or even family members without any monetary gain to the insider. Thus, the Court’s ruling in Salman will also settle a current split between the Second and Ninth Circuits.

By way of background, for tipper–tippee cases, courts have determined that it is a crime for an insider with a duty of confidentiality (otherwise known as a tipper) to intentionally or recklessly provide confidential information (otherwise known as a tip) to another (otherwise known as the tippee) and to receive a personal benefit, directly or indirectly, from such action. The tippee, to be criminally liable, must also know about the confidential nature of the information (which has been breached) and the benefit the insider received. The Court specified much of these requirements in Dirks v. SEC, 463 U.S. 646 (1983), where it also stated “absent some personal gain, there has been no breach of duty to stockholders.” 

How is personal gain defined? This is the main question the Court must decide in Salman, thereby resolving the federal circuit split. In Salman, the Court seemed both unwilling to take steps away from its prior precedent and suspect of the additional sweeping arguments made by the petitioner and the government. During the petitioner’s argument, Salman’s attorney contended that a line needed to be drawn as to what constituted a personal benefit. She suggested that the Court require the benefit to be tangible—not necessarily monetary or personal—but tangible. Justice Breyer, however, countered that helping “a close family member is like helping yourself.” Justice Kennedy clarified that in the law of gifts “we don’t generally talk about benefit to the donor” but that giving to a family member “ennobles you.”

The Justices’ statements appeared to indicate that they seemed more comfortable agreeing with the government, that insider information packaged as gifts to close friends or family crossed the line into creating or manifesting personal gain for the tipper, consistent with precedent. But they appeared unwilling to go further than that, despite the government’s urging that insider trading occurs whenever the insider provides confidential information for the purpose of obtaining a personal advantage for somebody else, regardless of previous or future relationships between the tipper and tippee. The government seemed not to view the personal advantage as a gain or benefit as those words are used colloquially. Instead, the government contended that the access to and communication of the confidential information in breach of the duty of confidentiality is in and of itself “a personal gain,” “a gift with somebody else’s property.” This interpretation was met with skepticism by the Court and the government seemed to back away from its argument, stating instead that it would not seek to hold liable somebody who was “loose in their conversations but had no anticipation that there would be trading.”

Justice Alito commented disapprovingly that neither side’s argument was consistent with the Court’s precedent in Dirks. Indeed, the Court appeared worried that any outcome other than affirmance would require new lines to be drawn. Any change to the law, as a result of this case, would impact the Court’s own judicially created insider trading standard from Dirks. As Justice Kagan put it to the petitioner: “[y]ou’re asking us to cut back significantly from something that we said several decades ago, something that Congress has shown no indication that it’s unhappy with, . . . [when] the integrity of the markets are a very important thing for this country. And you’re asking us essentially to change the rules in a way that threatens that integrity.” By the end of the argument, the government basically summarized what seemed to many observers, the Court’s preference: “If the Court feels more comfortable given the facts of this case of reaffirming Dirks and saying that was the law in 1983, it remains the law today, that is completely fine with the government.”

In light of the arguments and interactions with the Justices, the Court seems most comfortable with reaffirming the standards established with Dirks. Thus, it appears that despite the ruling in Newman, Salman may have provided the Court with nothing more than an opportunity to affirm its long-standing precedent.

First Circuit Quietly Joins the “Personal Benefit” Fray

The First Circuit recently added to the increasingly ambiguous personal benefit requirement, finding that an alleged friendship and promises for free “wine, steak, and visits to a massage parlor” were enough to support a misappropriation theory of liability for insider trading. United States v. Parigian, — F.3d —, No. 15-1994, 2016 WL 3027702, at *2 (1st Cir. May 26, 2016). As highlighted in previous posts, the Second and Ninth Circuits have interpreted the personal benefit requirement differently, and in January, the Supreme Court granted certiorari to review the issue.

Parigian pleaded guilty to criminal securities fraud on the condition that he could appeal the denial of his motion to dismiss the superseding indictment for failing to allege a crime. Id. at *1. The indictment alleged that Parigian’s golfing buddy, Eric McPhail, provided nonpublic information to Parigian that McPhail had received from a corporate insider. Id. at *1–2. McPhail was not alleged to have engaged in any trading himself; instead, he was compensated for the information “with wine, steak, and visits to a massage parlor.” Id. at *2. Parigian argued the indictment failed to properly allege a “misappropriation” theory of liability for insider trading because, among other things, there was no personal benefit to McPhail. Id. at *3.

In Dirks v. SEC, 463 U.S. 646, 662 (1983), the Supreme Court ruled that the tippee in a traditional insider trading scheme cannot be held liable unless the insider “will benefit, directly or indirectly, from his disclosure.” The First Circuit has, by its own admission, “dodged the question” of whether “such a benefit need be proven in a misappropriation.” Parigian, 2016 WL 3027702, at *7. Instead, the First Circuit has twice considered the issue and determined that it was satisfied, if required, under the facts of those cases. Id. It was satisfied, the court said, because in one case the misappropriator and tippee were “business and social friends with reciprocal interests” and in the other case because “the mere giving of a gift to a relative or friend is . . . sufficient.” Id.

Although the court acknowledged the more recent decisions of the Second Circuit and the Ninth Circuit, the former holding that objective proof of a potential pecuniary gain is necessary and the latter holding that evidence of a close personal relationship is enough, the court refused to stray from its own precedent. Id. at *8. Under that precedent, the indictment adequately alleged a personal benefit because of the “friendship between McPhail and Parigian plus an expectation that the tippees would treat McPhail to a golf outing and assorted luxury entertainment.” Id.

Further clarity will have to wait for the Supreme Court’s decision next term.

U.S. Supreme Court to Take Up Issue of “Personal Benefit” in Insider Trading Context

The U.S. Supreme Court granted certiorari this week in a case that is sure to draw significant attention given its likely implications on insider trading liability. Bassam Salman filed the petition after the Ninth Circuit affirmed his insider trading conviction in United States v. Salman, 792 F.3d 1087 (9th Cir. 2015).

Salman was convicted of conspiracy and insider trading arising out of a trading scheme involving members of his extended family. During the time period at issue, Maher Kara, Salman’s future brother-in-law, had access to insider information regarding mergers and acquisitions of and by his firm’s clients that he provided to his brother, Michael Kara. Michael subsequently traded on the information. Michael then shared the information he learned from Maher with Salman. Salman also traded on the information.

Following his conviction, Salman appealed and argued that there was no evidence that he knew that Maher disclosed information to Michael in exchange for a personal benefit. The personal benefit requirement, first derived from the Supreme Court’s decision in Dirks v. SEC, 463 U.S. 646 (1983), requires that the insider personally benefit from the disclosure—including through pecuniary gain, a reputational benefit that will translate into future earnings, or where the insider makes a gift of confidential information to a trading relative or friend. Critical to the third manner of conferring a personal benefit, the Second Circuit recently held in United States v. Newman, 773 F.3d 438, 452 (2d Cir. 2014), that to the extent “a personal benefit may be inferred from a personal relationship between the tipper and tippee . . . such an inference is impermissible in the absence of proof of a meaningfully close personal relationship that generates an exchange that is objective, consequential, and represents at least a potential gain of a pecuniary or similarly valuable nature.”

Salman urged the Ninth Circuit to adopt the Newman court’s interpretation of Dirks to require more than evidence of a friendship or familial relationship between the tipper and the tippee. The Ninth Circuit declined, holding that doing so would require the court to depart from the ruling in Dirks that liability can be established where the insider makes a gift of confidential information to a trading relative or friend. The Supreme Court likely will resolve whether the concept of a personal benefit addressed in Dirks requires proof of an objective, consequential, and potential pecuniary gain—as the Newman court held—or whether it is enough that the insider and tippee shared a close family relationship.

The Newman decision has already resulted in the dismissal of insider trading charges against several individuals. The Supreme Court’s ultimate decision will therefore provide much needed clarity in this area, given the sharp split between the Second and Ninth Circuits on the issue.

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