Supreme Court justices heard arguments this week from the first insider trading case to make its way to the high court in more than 20 years.
The case of Salman versus The United States could redefine insider trading. At stake is the standard that prosecutors use to prove insider trading. Justices must decide what constitutes “personal benefit.”
In Salman, the tipper Maher Kara did not financially profit from the sharing of information. Kara’s lawyer argues this means his actions do not constitute insider trading. However, prosecutors argue that Kara still benefitted due to the family relationship with Salman; Kara is Salman’s brother-in-law.
According to the New York Times on Wednesday, justices seemed more sympathetic to prosecutors but also wary of giving the government too much power in insider trading cases.
Congress has never defined insider trading; leaving it up to regulators and the courts.
A ruling is due in June.
Meanwhile, Compliance Officers know all too well that once a firm faces insider trading allegations, the harm to reputation may already be done.
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