Supreme Court Backs Prosecutors Over Tips From Friends, Family in Insider-Trading Cases

Commentary, News

Justices, in unanimous decision, affirm conviction of Bassam Salman, who had used information from his brother-in-law


WASHINGTON—The Supreme Court gave the government more leeway to pursue insider-trading cases in a ruling on Tuesday that upheld the prosecution of a Chicago man convicted of trading on inside tips from relatives.

In a unanimous opinion by Justice Samuel Alito, the court said prosecutors could prove a case by simply showing the trader and the person who passed on the tip were relatives, without alleging any further quid pro quo. That gives prosecutors more latitude in cases than a federal appeals court in New York allowed in a separate 2014 case that had raised the bar for insider-trading prosecutions.

“Giving a gift of trading information to a trading relative is the same thing as trading by the tipper followed by a gift of the proceeds,” Justice Alito wrote.

The ruling rejected arguments by defendant Bassam Salman, who traded on information originally from his brother-in-law who worked as an investment banker at Citigroup Inc.He was convicted in 2013 and sentenced to three years in prison.

Mr. Salman had contended evidence of a family relationship between the tipper and the tip recipient wasn’t enough to support a conviction.

The high court disagreed, saying an earlier 1983 Supreme Court decision easily resolved the case against Mr. Salman. Justice Alito said the earlier precedent “makes clear that a tipper breaches a fiduciary duty by making a gift of confidential information to a trading relative, and that rule is sufficient to resolve the case at hand.”

That 2014 ruling, in a case known as U.S. v. Newman, had been a blow to an aggressive strategy by the government in prosecuting insider-trading cases, causing it to drop other cases and rethink its approach. That ruling said prosecutors had to prove the insider disclosed information for a personal benefit that included something valuable being exchanged.

“To the extent that the Second Circuit in Newman held that the tipper must also receive something of a “pecuniary or similarly valuable nature” in exchange for a gift to a trading relative, that rule is inconsistent,” with existing law, Justice Alito wrote.

While the ruling is good news for prosecutors, the court declined to address the thornier questions raised by the Newman case about trading among friends and professional acquaintances.

Write to Brent Kendall at and Aruna Viswanatha at

Read this article in its original format at The Wall Street Journal

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