Alexandra Shapiro Argues Insider Trading Case In The Supreme Court

On October 5, 2016, Alexandra Shapiro argued before the Supreme Court of the United States in Salman v. United States, No. 15-628, the first insider trading case that the Court has heard in nearly two decades. Our client, Bassam Salman, was convicted in the Northern District of California of trading on inside information that he allegedly received third-hand from his brother-in-law, who received it from his brother, an investment banker. There is no federal statute that expressly proscribes insider trading or “tipping.” But the Supreme Court has previously held that a tippee can be criminally liable under the general anti-fraud provisions of the securities laws for trading on information that an insider had disclosed for a “personal benefit.”  The question in Mr. Salman’s case is what “personal benefit” to a corporate insider is sufficient to make an outsider’s trading on nonpublic information criminal.

Ms. Shapiro argued to the Court that “personal benefit” must be narrowly construed to mean “financial benefit,” both to afford defendants the constitutional safeguards of due process and fair notice, and to avoid infringing on Congress’ exclusive constitutional authority to define federal crimes.  She noted that “other countries have insider trading laws, and all of those laws use words like ‘insider’ and define under what circumstances a person is violating the law by trading.” By contrast, Mr. Salman’s case involves “a crime that was never defined by Congress.” Ms. Shapiro argued that a pecuniary gain standard is necessary because the Court “has repeatedly held that there is no general duty to refrain from insider trading. And it’s essential that the market participants understand when the line is crossed and when it’s not.”

Alexandra Shapiro and Daniel O’Neill represent Mr. Salman, together with co-counsel John Cline. A recording and transcript of Ms. Shapiro’s argument can be found here.  Copies of our briefs to the Supreme Court are available here and here.