The Continuing Impact of Salman v. United States on Insider Trading Prosecutions

When the U.S. Supreme Court issued its decision in Salman v. United States, it was anticipated that it would provide much needed clarity to the financial community, the S.E.C. and U.S. prosecutors as to what activity does and does not constitute insider trading. However, the cases filed and the court decisions issued since the Salman decision have shown that there is still a significant ambiguity regarding the nature of the “personal benefit” which must be received by the tipper of inside information and the requisite relationship which must exist between the tipper and tippee, in order for insider trading liability to attach. This ambiguity was highlighted most recently in the Second Circuit’s split decision which upheld the conviction of Mathew Martoma.

This program, led by attorney Ralph Siciliano, will discuss the holding in the Salman case as well as the earlier Second Circuit decision in U.S. v. Newman, and how those decisions affected the landscape of the law governing insider trading and government prosecutions which followed. He will explore the facts of recent indictments, including the recently filed charges against Michael Rivas, the conviction of Billy Walters, and the case of Joseph Reggierri in which the SEC Commissioners affirmed the dismissal of insider trading charges brought by the SEC’s Enforcement Division. Each of these cases, as well as the Second Circuit’s decision in the Martoma case, offer insights as to how the court and prosecutors are navigating the altered landscape created by the Salman decision.

Political intelligence as a form of inside information has also become a focus of prosecutors, as reflected on the recent indictment filed in the case of U.S. v. Blaszcak. Mr. Siciliano will explore this “new frontier” of insider trading liability as well.

Learning Objectives:

1. Identify the elements of an insider trading violation
2. Address the unresolved issues concerning insider trading liability
3. Advise financial services clients on when they are deemed to be in possession of information which triggers a prohibition from trading
4. Determine what constitutes “political intelligence” and when does possession of such information create potential liability for insider trading
5. Discuss the circumstances which are likely to trigger on insider trading prosecution