Stroock Special Bulletin
"Supreme Court Leaves Remote Tippee Liability Unresolved in Salman v. United States"
Ruling in its first insider-trading case in two decades, a unanimous Supreme Court in Salman v. United States, reaffirmed the test first articulated in Dirks v. SEC, 463 U.S. 646, 664 (1983), that a jury can infer a “personal benefit” to the tipper – and thus a breach of the tipper’s fiduciary duty – where the tipper, without more, “makes a gift of confidential information to a trading relative or friend.”
This Stroock Special Bulletin examines the Salman decision, which leaves unsettled the thornier question of whether a tippee is required to have knowledge of the inside source and benefit to the insider. The questions of what constitutes a “personal benefit” and what type of close personal relationship will qualify as conferring such a benefit also remain open under the narrow, fact-driven holding of Salman.