United States: Supreme Court Affirms That Pecuniary Benefit Not Required For Family Member Tips, But Declines To Address What Constitutes A Benefit In Other Contexts

Yesterday, the United States Supreme Court issued a unanimous, but narrow, ruling in Salman v. United States,1 regarding criminal tipper/tippee liability for insider trading, which the Supreme Court had not significantly addressed since its decision in Dirks v. United States in 1983.2 Following Dirks' holding that a tippee cannot be held liable for insider trading unless the tipper receives a "personal benefit," the Supreme Court ruled in Salman that a jury can infer that an insider receives an inherent personal benefit when making a gift of confidential information to a relative who trades on that information. The Court declined to adopt the Government's argument that "a gift of confidential information to anyone, not just a 'trading relative or friend,' is enough" to establish liability, and noted that ultimately the question of whether a benefit was received will be a factual one for the jury.3 The Court also expressly left intact the Second Circuit's crucial ruling in United States v. Newman4 that a remote tippee who receives information second or third hand must know of the personal benefit received by the insider in order to be liable.


The federal courts of appeal for both the Second and Ninth Circuit had issued recent opinions examining Dirks' "personal benefit" rubric; in granting certiorari in Salman, the Supreme Court said it was addressing "the tension" between those decisions on the personal benefit issue.5

In United States v. Newman, the Second Circuit addressed the Government's prosecution of two hedge fund managers who allegedly received tips relating to two issuers from individuals who were themselves several steps removed from the original tipper. The tipper associated with one of the issuers, who was in the relevant company's investor relations department, had provided information about the company's earnings to a former colleague at an investment firm. In reversing the convictions, the Second Circuit held—in the context of individuals who were professional acquaintances, not close friends—that in order to establish a personal benefit to the tipper, it is necessary that the personal benefit to the tipper is "objective, consequential, and represents at least a potential gain of a pecuniary or similarly valuable nature."6 The Second Circuit also held that, regardless of the nature of the personal benefit to the tipper, a tippee does not engage in illegal insider trading unless he knows of the personal benefit to the tipper.

The Ninth Circuit held in United States v. Salman7 that the fact that the insider and the tippee shared a family relationship was sufficient to prove a personal benefit. The defendant Bassam Salman's brother-in-law, an investment banker, provided inside information to his brother, who, in turn, shared it with the defendant, who further shared it with his wife's sister's husband who traded and shared the resulting profits among the family members involved. Salman was convicted by a jury on four counts of securities fraud and one count of conspiracy to commit securities fraud. The Government argued that one of the required elements of insider trading—that the insider personally benefited from the disclosure of the confidential inside information and that the defendant tippee knew that the insider had personally benefited from the disclosure—was met because, among other things, the insider testified that he gave his brother the information because he loved him and wanted to benefit him, and the Government presented evidence that Salman was aware of the two brothers' close relationship. The Ninth Circuit distinguished Newman, which was invoked by Salman on appeal, holding that, while pecuniary gain is one species of personal benefit, making a gift of confidential information to a relative is another.

In October 2015, the United States Supreme Court declined to grant certiorari in the Newman case, presumably because the Government did not challenge the Second Circuit's determination that a tippee must know of the personal benefit to the tipper, which provided an independent ground for reversing the convictions. However, in January 2016, the United States Supreme Court granted certiorari in Salman, which raised the question of what constitutes a sufficient "personal benefit" for insider trading purposes. During oral argument in October 2016, the Justices strongly signaled that they would uphold Salman's conviction under the "gift" theory given the familial relationship. However, it was less clear how far the Court would decide the scope of such an intangible, non-pecuniary "personal benefit" could extend, particularly when the tipper and tippee were not closely related.

The Supreme Court's Decision

As expected, in a unanimous opinion, authored by Justice Samuel Alito, the Court held that the jury could infer that the tipper in Salman personally benefited from making a gift of confidential information to a relative who traded on it.

Justice Alito stated that the Court would "adhere to Dirks, which easily resolves the narrow issue presented" by these facts.8 In Dirks, the Court held that an insider had to receive a personal benefit in order to be convicted of unlawful insider trading and mere disclosure of confidential information without a personal benefit to the tipper was insufficient. Dirks suggested that a personal benefit could "exist when an insider makes a gift of confidential information to a trading relative or friend," and "[t]he tip and trade resemble trading by the insider himself followed by a gift of the profits to the recipient."9 Applying these principles, Justice Alito wrote that it was "obvious" that the insider would have personally benefited had he personally traded on the information and delivered the proceeds from the trades to his brother as a gift.10 Justice Alito noted that the insider "effectively achieved the same result by disclosing the information to [his brother], and allowing him to trade on it."11 Adopting the phrasing in the Ninth Circuit's Salman decision, the Court also noted that, to the extent Newman was inconsistent with Dirks regarding the nature of the personal benefit required for disclosures to relatives, the Supreme Court was adhering to its precedent in Dirks.

The Salman decision is noteworthy for what it did not say. The decision repeatedly emphasized the narrowness of the holding, which was limited to the situation in which information is disclosed among close relatives. Recognizing that there may be other cases in which the analysis of a personal benefit "will not always be easy for courts," the Court declined to address those situations.12 Specifically, the Court stated that "there is no need" to address the scope of the gift theory beyond the gift of confidential information to a trading relative—expressly choosing not to speak to the Government's argument that the personal benefit test for these types of relationships should be only whether the insider knew that the tippee would trade on the information.13 In Newman, for example, the tippee was a former work colleague of the tipper, not a relative or close friend. The Supreme Court did not address or resolve whether the standard for personal benefits articulated by the Second Circuit in Newman will still apply in that context. Finally, as noted, the Supreme Court expressly stated that it was not addressing Newman's holding that a tippee must know of the personal benefit obtained by the insider.

Implications of the Salman Decision

Based on the Court's opinion in Salman, following Dirks, it appears settled that when an insider provides a tip to a relative or close friend, a separate pecuniary benefit is not required. This has long been the law and is an entirely unsurprising result, as indicated in the unanimity of the decision. However, the Court's decision does not address—at all—what constitutes a benefit when the insider and the tippee are not related or close friends, which is the context typically relevant to professional and institutional traders and the area where federal prosecutors have focused particular attention in recent years. While it remains possible that the Supreme Court will address a case more analogous to Newman in the future, Newman for the moment continues to be the applicable law in the Second Circuit in situations involving professional contacts/acquaintances.


1 Salman v. United States, Case Number 15-628, 578 U.S. ___ (2016).

Dirks v. S.E.C., 463 U.S. 646 (1983).

Salman, slip op. at 7.

U.S. v. Newman, 773 F.3d 438 (2d. Cir. 2014).

5   Salman, slip op. at 6.

Newman, at 452.

U.S. v. Salman, 792 F.3d 1087 (9th Cir. 2015).

Salman, slip op. at 8.

9   Dirks, at 664.

10  Salman, at 9.

11  Id.

12  Id. at 11 (quoting Dirks at 664).

13   Id. at 11.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.