Supreme Court’s Anticipated Ruling on Insider Trading

In its 2016 fall term, the U.S. Supreme Court will have the opportunity to consider two cases involving securities laws, one of which is already on the calendar for oral argument. The cases concern the “personal benefit” required to establish liability for insider trading and the jurisdictional requirements for class actions under the Securities Act of 1933. Depending on how the Court rules, the implications for companies, their constituents and practitioners could be profound. In its first insider trading case since 1997, the Supreme Court will consider whether the personal benefit required to establish insider trading liability must involve a pecuniary element, or whether a gift or other social benefit is enough. Legal observers hope the Supreme Court’s decision in Salman v. U.S. will resolve the years-long uncertainty around the definition of personal benefit first articulated in Dirks v. SEC.