Difficulties in insider trading cases an argument for strong criminal defense, P.2

In our last post, we began looking at the concept of profit in insider trading cases, and why it can be difficult to sort out. Last month, the highest court in the land decided it would take on a case involving the issue of what prosecutors must prove to obtain a conviction for illegal tipping where the tipper and the tippee had a close personal or familial relationship.

The case in question involved the exchange of insider information within a tight-knight family, with no money ever being exchanged. In a previous appeal in the case, it had been determined that prior case law did not require a showing of tangible benefit beyond the familial relationship itself for prosecutors to obtain a conviction. The question on appeal, then, is partly whether a benefit can be assumed from a close relationship alone.

Sorting out why the high court decided to hear the case has been a matter of interest for commentators. Previously, the Supreme Court had refused to review a case in which two hedge fund managers had insider trading convictions overturned on the basis that the government failed to show that there was a “meaningfully close personal relationship” which gave rise to an “objective and consequential” exchange and which presented the possibility for pecuniary or other valuable gain. In that case, insider information was shared in the context of a close friendship and the benefit seemed to have been only the friendship itself.

Critics of the Supreme Court’s decision not to here the previously mentioned case argued that the way the lower courts handled the case contradicted the high court’s ruling in a previous case, and that allowing the decision to stand would not only harm the market, but also make it more difficult for the government to enforce illegal trading laws.

It will certainly be interesting to see how the high court decides in this more recent case, and we will be sure to keep our readers updated of developments.


New York Times, “An Insider Trading Case Heads to the Supreme Court,” Peter J. Henning, Jan. 20, 2016.

Knowledge @ Wharton, “Why Insider Trading Is Hard to Define, Prove and Prevent,” Nov. 11, 2009.


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