US Supreme Court’s ‘Salman v. US’ Decision Answers One Insider-Trading Question, Leaves Others Unresolved

bainbridgeFeatured Expert Contributor — Corporate Governance/Securities Law

Stephen M. Bainbridge, William D. Warren Distinguished Professor of Law, UCLA School of Law

In Salman v. United States, the US Supreme Court returned to the problem of insider trading for the first time in almost two decades. The Court reaffirmed a rule from prior insider-trade caselaw that a gift of information between friends and family constitutes the requisite benefit. Justice Alito’s very brief opinion for a unanimous Court, however, left a number of more difficult questions unresolved.

Bassam Salman was convicted of insider trading for using information he had received from a friend and relative by marriage named Michael Kara who, in turn, had received the information his brother Maher Kara, who was a Citigroup investment banker. Salman argued that liability in such cases should arise only when “there is proof of a meaningfully close personal relationship that generates an exchange that is objective, consequential, and represents at least a potential gain of a pecuniary or similarly valuable nature,” citing the Second Circuit’s decision in United States v. Newman. Continue reading

Friday Finger on the Pulse: From Our Blogroll and Beyond

  • Class-action defendants can learn much from plaintiff-leaning law-review article on “statistical adjudication” after Tysons Food v. Bouaphakeo (Class Action Countermeasures)
  • By the Justice Department’s own measure of success, its Foreign Corrupt Practices Act “pilot program” is failing (FCPA Professor)
  • The case for why FTC, not FCC, should regulate internet privacy (Truth on the Market)
  • The Consumer Financial Protection Bureau joins the ranks of government censors with proposed gag rule on investigation targets (Overlawyered)
  • Online database IMDb.com files First Amendment challenge against California law banning inclusion of actors’ ages, citing rights of customers to receive information (Hollywood Reporter)
  • Suit claiming air emissions that fall to the ground constitute hazardous waste under Superfund proves too ambitious even for the Ninth Circuit (Marten Law Newsletter)
  • A new regulatory paradigm for SEC in 2017? (California Corporate & Securities Law via ProfessorBainbridge.com)
  • Competitors and whistleblowers will be the likely beneficiaries of FDA’s new online regulatory misconduct reporting tool (FDA Law Blog)

After Oral Argument in “Salman v. US,” Will Supreme Court Meaningfully Limit What Counts as Insider Trading?

bainbridgeFeatured Expert Contributor — Corporate Governance/Securities Law

Stephen M. Bainbridge, William D. Warren Distinguished Professor of Law, UCLA School of Law

Over a three-year period from 2004 to 2007, Citigroup investment banker Maher Kara disclosed confidential nonpublic information about upcoming mergers and acquisitions to his brother Michael Kara. In turn, Michael disclosed the information to his close friend Bassam Salman, who then indirectly traded in the affected stocks. When Salman was tried on charges of illegal insider trading, the government offered evidence that he knew the information originated with Maher.

The case presented two issues: First, what is the basis of liability when an insider tips information to an outsider? Second, what must the government prove in order to hold a remote tippee liable when the information is passed down a chain from tipper to tippee to a tippee of that tippee and so on? Continue reading

Video of WLF’s 30th Annual Preview Briefing of US Supreme Court Term Now Available

Our annual briefing was moderated by WLF Legal Policy Advisory Board Chairman Jay Stephens and featured commentary on free-enterprise-oriented cases the Court will hear this Term by Neal Katyal of Hogan Lovells and Daryl Joseffer of King & Spalding LLP.

The following materials were provided to attendees:

The Supreme Court’s NOT Top 10: October Term 2015 Petitions the Justices Should Have Granted

supreme courtThis Monday the U.S. Supreme Court will conduct its Long Conference, so named for the larger than usual number of certiorari petitions it considers there.  With the fate of so many cert petitions hanging in the balance—and the overwhelming majority of them about to be denied—now is an opportune time to look back at the top 10 cases that were wrongly denied cert in the Court’s last term.

As with the previous installments of my “Not Top 10” list (see here and here), no more than half the cases discussed below will be ones in which Washington Legal Foundation filed a brief in support of certiorari.  Also, the cases will once again be limited to those that affect economic liberty, including the need for legal certainty around key legal policies and regulatory regimes.  From WLF’s free-enterprise perspective, those cases that implicate competition in the marketplace, limited and accountable government, individual and business civil liberties, or rule of law concerns matter the most. Continue reading

SEC Drifting Further Away from Its Statutory Mission with Latest “Therapeutic Disclosure” Idea

bainbridgeFeatured Expert Contributor — Corporate Governance/Securities Law

Stephen M. Bainbridge, William D. Warren Distinguished Professor of Law, UCLA School of Law

*Editor’s Note: Washington Legal Foundation is pleased to have Professor Bainbridge joining our roster of WLF Legal Pulse Featured Expert Contributors. Professor Bainbridge is a member of WLF’s Legal Policy Advisory Board. He is a prolific scholar, whose work covers a variety of subjects, but with a strong emphasis on the law and economics of public corporations. He also authors ProfessorBainbridge.com, which over the last ten years has consistently earned ABA Top 100 law blog honors.

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An August 15, 2016 Wall Street Journal opinion piece critiqued the Securities and Exchange Commission’s (SEC) plan to require that public companies, in the words of SEC Chairman Mary Jo White, “include in their proxy statements more meaningful board diversity disclosures on their board members and nominees.”

This sort of disclosure, as Chairman White remarked when discussing another potential SEC disclosure mandate, is “directed at exerting societal pressure on companies to change behavior, rather than to disclose financial information.” So what she’s proposing now with regards to board diversity is known as therapeutic disclosure. Continue reading

Seventh Circuit Rejects Disclosure-Only Settlement in Merger Tax Suit, Embracing Delaware Chancery Court’s “Trulia” Decision

ARickeyK. Whittaker Guest Commentary

By Anthony Rickey, a solo practitioner at Margrave Law LLC in Georgetown, DE, and Keola R. Whittaker, an Associate with McGuireWoods LLP in its Los Angeles, CA office.

U.S. Court of Appeals for the Seventh Circuit Judge Richard Posner’s criticism of meritless settlements in In re Walgreen Co. Stockholder Litigation, (Aug. 10, 2016) will cheer hearts skeptical of the utility of mergers-and-acquisitions (M&A) class actions.  The opinion reversed and remanded a district court’s approval of a disclosure settlement arising out of the merger of Walgreen Co. and Alliance Boot GmbH.   Judge Posner explained why each of the six supplemental disclosures offered to the class as settlement consideration were, variously, “worthless,” “provided no new information,” or “could be derived by simple arithmetic from data in the proxy statement. . . .”   After reversing the trial court, the appellate court suggested that the class counsel who had supported such a settlement, and sought $370,000 in fees, had not adequately represented the class, and advised the district court on remand to seriously consider dismissing the suit or appointing new class counsel.  Continue reading