Last month, the Southern District U.S. Attorney's Office filed an insider trading case against Walter Little and Andrew Berke. Little is accused of misappropriating confidential information from his law firm and passing it to Berke, a friend and business associate. There is no mention, however, of what personal benefit Little received by passing on the information to Berke other than their relationship. If the case were to result in a conviction, which very much remains to be seen, it may force the U.S. Court of Appeals for the Second Circuit to reexamine its holding in United States v. Newman, which was partially overruled by the Supreme Court in Salman v. United States.

The circuit's 2014 decision in Newman—that the benefit to the tipper had to be “pecuniary or similarly valuable in nature,” and that the tippee had to have specific knowledge of that benefit—was followed by a significant decrease in insider trading prosecutions. According to Department of Justice statistics, insider trading prosecutions dropped nearly 25 percent in the year following Newman. Similarly, the number of insider trading actions brought by the Securities and Exchange Commission fell more than a third. Thus, when the Supreme Court agreed for the first time in almost twenty years to consider the propriety of an insider trading conviction in Salman v. United States, prosecutors hoped Newman would be overruled and the downward trend would end.

Law enforcement got its wish to a certain extent. In Salman, the Supreme Court partially rejected Newman and held that to be convicted of insider trading, a tipper's personal benefit can be inferred when he or she tips information to a relative. In so holding, the Supreme Court flatly rejected the Second Circuit's holding in Newman that a personal benefit to the tipper must be of a “pecuniary or similarly valuable nature.” In addition, the Supreme Court reaffirmed the broad language in Dirks v. SEC, 463 U.S. 646 (1983), which it stated “easily resolve[d]” cases like Salman. The court broadly analyzed Dirks as forbidding an insider from tipping material nonpublic information for any personal gain, which could include merely helping a family member. However, the court declined to address what it called the “difficult cases” as to whether personal benefit can be inferred when a tipper gives information to a business associate or friend.