137 S. Ct. 420
Maher Kara was an investment banker in Citigroup’s healthcare investment banking group and dealt with highly confidential information about mergers and acquisitions involving Citigroup’s clients.1
After starting at Citigroup, Maher began discussing aspects of his job with his older brother Michael, initially relying on Michael’s chemistry background and later discussing cancer treatment companies while their father was ill.2 Michael began to trade on the information Maher shared with him.3
Ultimately, Maher began assisting Michael’s trading by sharing inside information, sometimes using code words or information from deals he was not working on.4 Without his younger brother’s knowledge, Michael fed the information to others, including Salman, Michael’s friend and Maher’s brother-in-law.5 By the time the authorities caught on, Salman had made over $1.5 million in profits that he split with another relative.6
Salman was indicted on one count of conspiracy to commit securities fraud and four counts of securities fraud.7 Both Maher and Michael pleaded guilty and testified at Salman’s trial.8 The evidence established that Maher and Michael enjoyed a very close relationship, and Maher testified that he shared the information to benefit Michael and fulfill his needs, including one instance where Michael requested information instead of money.9
Michael testified that he told Salman the information came from Maher.10
Salman was the first on his phone list when major deals came in.11
After a jury trial in the Northern District of California, Salman was convicted on all counts and sentenced to 36 months of imprisonment, three years of supervised release, and over $730,000 in restitution.12 While his appeal to the Ninth Circuit was pending, the Second Circuit issued its opinion in United States v. Newman.13 The Ninth Circuit affirmed Salman’s conviction.14 The Supreme Court granted certiorari to resolve the tension between the Second Circuit’s Newman decision and the Ninth Circuit’s decision in this case.15
Whether an insider's disclosure of confidential information as a gift to a trading relative satisfies the personal-benefit requirement for establishing tippee liability?16
Under Dirks v. SEC, a tipper personally benefits from the disclosure of confidential information when the tipper makes a gift of that information to a trading relative or friend, allowing the inference of a breach of fiduciary duty.17 This is because the tip and trade resemble trading by the insider himself followed by a gift of the profits to the recipient.18
Yes. Maher Kara, an investment banker at Citigroup handling confidential merger information, shared that information with his brother Michael, a trading relative, expecting Michael to trade on it, as shown by Maher’s testimony that he tipped to help Michael and fulfill his needs and by their very close family relationship in which Michael was like a second father to Maher.19
The insider's disclosure of confidential information as a gift to a trading relative satisfies the personal-benefit requirement for establishing tippee liability.20