Tuesday, December 6, 2016
As co-blogger Solomon Wisenberg noted here, the Supreme Court issued an opinion today in Salman v. United States resolving an issue related to insider trading. But is the law really clear now, as some claim (see here)?
It would appear that Salman does little to modify the current landscape regarding insider trading, except to perhaps reaffirm the scope covered under the Court's prior holding in Dirks and reject the Second Circuit's Newman approach. The unanimous Court stresses its adherence to the doctrine from Dirks. The Court states, " Dirks 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."
But it is important to note here, that the Court is also issuing a narrow opinion and not providing extensive guidance on how to assess liability for gift-giving. The Court notes that this case "is in the heartland of Dirk's rule concerning gifts." But the Court goes on to say, "[i]t remains the case that 'determining whether an insider personally benefits from a particular disclosure, a question of fact, will not always be easy for courts.'" The Court states, "there is no need for us to address those difficult cases today, because this case involves 'precisely the "gift of confidential information to a trading relative" that Dirks envisioned.'"
Although this factual scenario did not provide a basis for the use of the Rule of Lenity, one has to wonder if another issue not in the heartland might offer such a scenario.