I mentioned a few times during the semester that the Supreme Court was considering an insider trading case this term. They issued their opinion today in Salman v. United States. It was an 8-0 decision with Alito writing the opinion. The opinion is not long and lays out very nicely how insider trading works – at least as to tippees!
It seems a guy named Maher Kara “was an investment banker in Citigroup’s healthcare investment banking group.” He is the source of the inside info. It is info about corporations looking for mergers or acquisitions, thus hiring investment bankers. He gave his older brother Michael the inside info – apparently bunches of times – because he and his brother were very close. Michael used the info to trade in the securities of Maher’s clients. Michael (not Maher) gave the inside info to Salman (the defendant) who also traded on it. Salman was Maher’s brother-in-law and was apparently also close to Michael. The SEC went after Maher, Michael and Salman under Rule 10b(5). Maher and Michael basically confessed but Salman fought the criminal charges. The SEC said that Maher was the “certain person,” and Michael and Salman were tippees. Continue reading