Supreme Court Rejects Newman Requirement of “Pecuniary or Similarly Valuable” Personal Benefit for Insider Trading Liability for Tipping Family and Friends (continued from page 2) The Supreme Court affirmed Salman's conviction, essentially only requires some evidence (even cir- based on alleged gifts of inside information to holding that a gift of inside information to family or cumstantial evidence such as phone logs) that the mere social acquaintances, fellow employees, or friends is sufficient to prove a “personal benefit” tipper gave information to the tippee. networking contacts—using strained arguments for insider trading tipping liability. The Court rea- of “friendship.” And they will bring insider trad- soned that such a gift can be inferred to “provide So where does this leave the Newman decision? ing cases based solely on circumstantial evidence the equivalent of a cash gift.”® Specifically, the The Newman decision itself was not overturned by (e.g, a pattern of phone calls) where there is no Court reasoned that if the tipper personally traded the Supreme Court, because Newman also relied direct proof of trading based on inside informa- on inside information himself for a profit, but gave on the lack of proof that the tippees who traded on tion. Accordingly, with Sa/man imposing a lower the proceeds to his brother, the tipper received a inside information knew that the tippers provided standard of proof, it is imperative that clients personal benefit (cash) and is liable for insider contact counsel immediately at the first hint of a trading. So, it reasoned, where a tipper achieves government insider trading investigation. effectively the same result by gifting the informa- ’ ’ ; tion to his brother with the expectation that the UNYeleansiteevtitemeteh MCS og me iP OP ee brother will trade on the information to obtain a the standard of proof for 2773 F.3d 438, 452 (2d Cir, 2014). cash profit, the result should be the same. — Pe ee 3 Salman, Slip Op. at 9-