Cadwalader attorneys considered oral arguments in the Supreme Court case, Salman v. United States. The attorneys anticipate that the case will "clarify the government's burden in proving insider trading cases against tippers and tippees." They noted: "[ever since] the Second Circuit Court of Appeals December 2014 decision in United States v. Newman, the government's ability to aggressively pursue insider trading cases involving tipping has been in doubt." Further, they stated: "many courts have not followed Newman closely," including the present case before the Supreme Court. For that reason, Newman "has not completely undermined the DOJ and the SEC's ability to pursue tipping cases," they said.
Commentary / Douglas Fischer
The Justices appeared to be unmoved by Salman's argument that insider trading liability must be construed narrowly because the offense is not defined precisely by statute. Justice Kagan expressed concern over Salman's request "to change the rules in a way that threatens [the] integrity [of the markets]." Justice Kagan's comments do not suggest a willingness to adopt Salman's urged limitation on insider trading.
It is unclear whether the Supreme Court's ruling will elaborate on or clarify Dirks' personal gain requirement, or if the decision will maintain the status quo. Either way, Cadwalader attorneys concluded that Newman is unlikely to be a serious impediment to prosecuting insider trading cases involving tipping.
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