The Supreme Court unanimously supported a jury’s conviction of Bassam Yacoub Salman for insider trading, siding with prosecutors in a crucial insider trading case.
Tuesday’s 8-0 opinion delivered by Justice Samuel Alito said that gifts of confidential information from an executive to a relative violated securities laws. Salman traded on information he received through his significant other’s brother, who was a Citigroup investment banker.
In Salman v. United States, the high court sought to decide whether a conviction for insider trading required the person who traded on the inside information to know the source of the information benefited. A jury found Salman guilty because it decided he had knowledge that his source was inappropriately disclosing inside information and that his source earned a “reputational benefit” that could translate into future earnings by helping out a friend.
“The tipper benefits personally because giving a gift of trading information is the same thing as trading by the tipper followed by a gift of the proceeds,” Alito wrote.
The high court’s broad interpretation of insider trading was cheered by U.S. Attorney Preet Bharara, who has led the charge against insider trading on Wall Street from the Southern District of New York.
“The court stood up for common sense and affirmed what we have been arguing from the outset — that the law absolutely prohibits insiders from advantaging their friends and relatives at the expense of the trading public,” Bharara said in a statement. “Today’s decision is a victory for fair markets and those who believe that the system should not be rigged.”
