12.3 case brief PDF

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Salman v. US Facts: Salman traded through his brother-in-law using inside information from Kara’s brother and was charged with securities fraud and insider trading. He appealed based on the reasoning that there was not enough evidence that he knew the information used for the trades. (you should reverse my conviction because my tipper didn’t benefit from it) Legal Question: Is a close family relationship sufficient to convict someone for insider trading? Does giving non-public information as a gift enough to constitute securities fraud Decision and Reasoning: Yes. Salman knew he was using insider information. Since Maher stood to benefit when tipping off his brother, who in turn told Salman, then Salman’s knowledge supported his conviction. Analysis: If it is the case that Salman was directly told by Maher to make these trades because he claimed it to be insider information, that would be a different story than someone giving advice to a friend who doesn’t know that the information is inside info. The liability being given to Salman seems strange when it was Maher or Kara at fault for exposing/passing around the information and telling Salman to make x trade. (even if it was a gift, you are still liable)

Dirks v SEC Facts: Dirks received insider info that EFoA was vastly overstated and decided to investigate further. He discussed this information with other investors who sold their stock based on Dirk’s info. He also urged the Wall Street Journal to publish an article exposing the fraud allegations. Legal Question: Were Dirk’s actions a violation of the federal securities law? Decision and Reasoning: No. Since Dirk did not benefit financially himself or have a relationship with EFoA, he neither had a duty to disclose nor did he violate the federal securities law. Analysis: While Dirk did not gain, others did with the information that otherwise would not have. I don’t see how this is different than the Salman case if say Maher didn’t benefit from it....