WASHINGTON Oct 5 The U.S. Supreme Court is set
to hear arguments on Wednesday in a closely watched case in
which the eight justices will consider whether to impose limits
on prosecutors contemplating insider trading charges against
hedge fund managers and other traders.
The justices will hear arguments in the case of Bassam
Salman, an Illinois man who prosecutors said made nearly $1.2
million trading on inside information from his brother-in-law
about deals involving clients of Citigroup Inc, where the
At issue is whether prosecutors in insider trading cases
must prove that an alleged source of corporate secrets, like the
brother-in-law, received a tangible benefit such as cash in
exchange for any tips.
Prosecutors have said requiring such proof would make
pursuing insider trading cases tougher, potentially preventing
charges against executives who tip friends or relatives without
receiving a tangible benefit in return.
Salman is asking the Supreme Court to throw out his 2013
conviction on conspiracy and securities fraud charges arising
from insider trading. He was sentenced to three years in prison.
The Supreme Court in January agreed to hear Salman's appeal
amid seemingly conflicting rulings by federal appeals courts in
San Francisco, where his case was heard, and New York, where a
wave of insider trading prosecutions has been pursued by federal
The New York-based 2nd U.S. Circuit Court of Appeals in 2014
overturned the conviction of two hedge fund managers, Todd
Newman and Anthony Chiasson, and narrowed prosecutors' ability
to pursue such cases in the process.
That court held that to be convicted, a trader must know
that the source received a benefit in exchange, and that such a
benefit was "at least a potential gain of a pecuniary (money) or
similarly valuable nature."
The ruling forced prosecutors under Manhattan U.S. Attorney
Preet Bharara to drop charges against 12 other defendants, out
of 107 people charged since 2009.
Salman sought to seize upon that ruling to try to overturn
his conviction. He argued he could not be convicted because no
proof existed that his brother-in-law, in tipping a family
member who in turn tipped Salman, received anything beneficial
The San Francisco-based 9th U.S. Circuit Court of Appeals
rejected that argument, saying that requiring such proof would
allow insiders to tip their relatives so long as they got
nothing in exchange.
(Reporting by Nate Raymond in Washington; Editing by Will