The Supreme Court heard oral argument last month in Salman v. United States, a case that requires the court to define the scope of the federal insider-trading law. Under the court’s prior precedent, a stock tip becomes “insider trading” if an insider personally benefitted by providing information to another. But what sort, and how much, “personal benefit” must be shown? The government, seeking enlargement of the statute’s scope, argues that an individual benefits personally by improving the relationship with her friends or family—in other words, an abstract benefit. By contrast, defense counsel in Salman maintains that an individual benefits only when she receives a tangible, quid pro quo benefit in return.
The Salman case arose from the defendant’s use of insider information originally divulged by his brother-in-law, Maher Kara. Kara, a banker at Citigroup, provided information regarding upcoming mergers and acquisitions to his natural brother, Michael. Michael Kara, in turn, provided the information to Salman, with whom he was close. Salman traded on the insider information and benefited significantly. He knew that the information came from Maher, later telling Michael that he would shred documents in order to “protect” Maher.
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