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Supreme Court’s Determination of ‘Personal Benefit’ Test Under Insider Trading Laws Raises Practical Implications for Financial Market Professionals

September 26, 2016

By Joshua G. Hamilton & Tim D. Reynolds

The mere utterance of the phrase ‘‘insider trading investigation’’ sends shivers down the spine of any asset manager. However, what makes this phrase even more daunting is the great uncertainty of what actually constitutes a violation in the context of a portfolio manager who traded on information provided by someone else. On October 5, 2016, the Supreme Court will hear oral argument in the case Salman v. United States to resolve a recent circuit split between the Second Circuit and Ninth Circuits regarding the lynchpin to tipper/tippee insider trading liability: What constitutes a ‘‘personal benefit’’ to a corporate insider sufficient to establish tipper/tippee liability for insider trading under Section 10(b) of the 1934 Exchange Act?

This article originally appeared in Bloomberg BNA.

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Tim Reynolds
Of Counsel, Litigation Department

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