BASSAM YACOUB SALMAN, PETITIONER v. UNITED STATES
Supreme Court of the United States, Dec. 6, 2016, Alito,
Insider Trading – A defendant may be liable for insider trading when the tipper makes a gift of confidential information to a trading relative. No monetary advantage is required.

Taking sides with the 9th Circuit against the 2nd

15 USC 78j makes it illegal to “in connection with the purchase or sale of any security” use “any manipulative or deceptive device or contrivance in contravention of such rules as the Securities and Exchange Commission] may prescribe”

17 CFR §240.10b–5 carries out that mandate, prohibiting “Employment of manipulative and deceptive devices,” including “any device, scheme or artifice to defraud,” or any “act, practice, or course of business which operates . . . as a fraud or deceit”

Those covered “may not tip inside information to others for trading.” If they do so, the “tippee acquires the tipper’s duty to disclose or abstain from trading if the tippee knows the information was disclosed in breach of the tipper’s duty, and the tippee may commit securities fraud by trading in disregard of that knowledge.”

A tippee’s liability for trading on inside information hinges on whether the tipper breached a fiduciary duty by disclosing the information. A tipper breaches such a fiduciary duty, we held, when the tipper discloses the inside information for a personal benefit. And, we went on to say, a jury can infer a personal benefit—and thus a breach of the tipper’s duty—where the tipper receives something of value in exchange for the tip or “makes a gift of confidential information to a trading relative or friend.”