By: Wendy R. Becker
Since Congress has not enacted a statute outlawing insider trading, or the trading of securities based on non-public information, outright, courts have struggled to define what constitutes insider trading. The Supreme Court held that a fiduciary duty was breached when the insider privy to the information receives a “personal benefit.” This Commentary analyzes a pending Supreme Court case, Salman v. United States, which addresses whether pecuniary gain is needed to constitute the personal benefit necessary for insider trading, or if certain relationships are enough for the tip to inherently create a personal benefit for the insider. The author argues that a “personal benefit” can occur when there is (1) a quid pro quo or (2) the relationship between insider and tippee is intimate enough to automatically lead to a benefit for the insider. This conclusion follows Supreme Court precedent and is consistent with the policies for outlawing insider trading.