Summary: On Wednesday, the federal Supreme Court will hear an insider trading case that will affect who can get prosecuted in the future.
This week, the U.S. Supreme Court is scheduled to hear an insider trading case that many say have monumental consequences. According to Reuters, this is the first time in twenty years that the high court has heard such a case, which is typically left to the Securities and Exchange Commission to handle.
On Wednesday, the eight justices will hear the case of Bassam Salman of Illinois. Prosecutors allege that he made nearly $1.2 million trading with insider information from his brother-in-law, who worked at Citigroup. He was convicted of securities fraud in 2014 and sentenced to three years in prison.
According to Reuters, the issue that is being closely watched is whether the government must prove in these types of cases that the person who gave the information received a tangible benefit like money for tips. Attorneys and prosecutors argue that proving tangible benefits would make it too difficult to pursue insider trading cases.
Salman said that his trading of Citigroup merger information was not illegal because there was no proof his brother-in-law received anything for the exchange. His argument was rejected by the 9th U.S. Circuit Court of Appeals in San Francisco, but that does not mean he will not try that defense in front of the Supreme Court.
Stephen Ascher, a lawyer at Jenner & Block, told Reuters that this ruling would define the rules of what actually violates the law. Over the past few six years, the SEC has been aggressive in cracking own on insider trading, but their efforts were stalled in December 2014 when a New York federal appeals court overturned the conviction of two hedge fund managers. The court said that a trader must know that the source received a benefit for the information for it to be illegal.
“I do think clarity is particularly important in this context, and right now there is a lack of clarity,” said Ascher. “The Supreme Court has the opportunity now to clean that up.”
Source: Reuters
Photo courtesy of SG Money Matters
