## Facts

- Maher Kara, an investment banker at Citigroup, had access to material, nonpublic information about healthcare mergers and acquisitions.
- From about 2004 to 2007, Maher regularly discussed pending deals with his brother, Michael Kara.
- After realizing Michael was trading on the information, Maher intentionally continued tipping Michael, expecting him to trade and intending to benefit him.
- Bassam Salman was closely connected to the Kara family; Maher was engaged to Salman’s sister, and Michael was Salman’s friend and later relative by marriage.
- Michael conveyed some of Maher’s inside information to Salman, and trial evidence supported that Salman knew the information came from Maher.
- Salman traded on the information (often through an intermediary account) and earned more than $1.5 million.
- A jury convicted Salman of securities fraud and conspiracy; the Ninth Circuit affirmed, declining to apply a restrictive “pecuniary benefit” gloss adopted by another circuit.

## Issues

1. Whether, under Dirks, an insider’s gift of confidential information to a trading relative or friend permits an inference of “personal benefit” sufficient to establish tipper/tippee liability.
2. Whether the government must prove that the tipper received a pecuniary or similarly valuable gain when the tip is framed as a gift to family or friends.

## Decision

- The Supreme Court unanimously affirmed Salman’s conviction.
- The Court held that, under Dirks, a jury may infer a tipper’s personal benefit when the tipper makes a gift of confidential information to a trading relative or friend.
- The Court rejected any requirement that the government additionally prove a pecuniary or similarly valuable exchange in a family-or-friend gift scenario.
- Applying this rule, Maher’s disclosures to his brother supported a finding of a fiduciary breach for personal benefit, and Salman could be held liable because he traded knowing the information was improperly disclosed.

## Legal Principles

- Section 10(b) and Rule 10b-5 prohibit trading on material, nonpublic information in breach of a duty of trust and confidence and prohibit tipping such information for trading when done for the tipper’s personal advantage.
- Under Dirks, tippee liability turns on whether the tipper breached a fiduciary duty by disclosing information for a personal benefit and whether the tippee knew (or was on notice) of that breach.
- A tipper’s personal benefit may be inferred when the tipper receives something of value in exchange for the tip or makes a gift of confidential information to a trading relative or friend.
- A gift of inside information to a trading relative or friend satisfies the personal-benefit requirement without separate proof of pecuniary or similarly valuable gain.

## Conclusion

The Court held that an insider’s gift of material, nonpublic information to a trading relative or friend is enough to establish the tipper’s personal benefit under Dirks, supporting criminal liability for a tippee who trades with knowledge of the improper disclosure.


Salman v. United States, 580 U.S. 39 (2016)