Current Developments in the Law of Insider Trading

The law of insider trading is still developing and remains far from settled. The U.S. Supreme Court's decision in Salman v. United States addressed the "personal benefit" element of an insider trading violation; that is, what kind of benefit must the tipper of inside information receive in exchange for tipping the information to the tippee, in order to establish liability for insider trading. Cases which have followed Salman reflect that significant ambiguity exists concerning this essential element. This program will discuss the holding in the Salman case, and cases in the First and Second Circuit Courts following Salman which discuss the relationship between the tipper and the tippee that must exist in order to satisfy the "personal benefit" requirement. 

Another unresolved issue concerning insider trading is whether the securities laws which regulate insider trading apply to crypto assets. In a case filed by the S.E.C. in July of this year, the agency alleged insider trading violations against a former product manager at the crypto exchange platform Coinbase, as well as the former manager's brother and friend. This is the first insider trading case brought where the SEC has alleged that crypto assets are securities. Highlighting the controversial nature of the S.E.C.'s claim is the fact that the parallel criminal case arising out of the same facts, filed by the U.S. Department of Justice, did not allege violations of the securities laws and based its charges solely on the wire fraud and conspiracy statutes. In this program, we will discuss the circumstances in which the S.E.C. views crypto assets as securities and how insider trading prohibitions apply to those assets. Lastly, our program will discuss a recent case in which the court dismissed the S.E.C.'s insider trading claims and what insights can be gleaned from the court's decision.

This program is designed both to explain the current state of the law concerning insider trading and to offer guidance to the financial community and their advisers on the circumstances in which information they receive in connection with their investment decisions constitutes "inside" information which may result in a prohibition from trading.

Learning Objectives:

1. Identify the elements of an insider trading violation

2. Discuss the unresolved issues concerning insider trading liability

3. Help attorneys advise their financial services clients on when they are deemed to be in possession of information which triggers a prohibition from trading

4. Review the circumstances which are likely to trigger insider trading prosecution