Insider Trading: Personal Benefit Has No Place in Misappropriation Tipping Cases

The Supreme Court’s decision last December in Salman v. United States[1] settled important issues concerning Rule 10b-5’s reach over trades based on a tip of confidential material information. One important question, however, remains unanswered: In tipping cases based on the misappropriation theory, is it necessary, as some courts have stated, to show that the tipper enjoyed a personal benefit of which the trader was aware? There are commentators who assume the need for such a showing,[2] but in fact the lower courts have split on the issue and the Supreme Court in Salman explicitly said that it was … Read more