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Salman v. United States
Updated 2/20/2024
Maher worked for a firm that did mergers. Mergers typically cause large, predictable stock price movements, so advance information about mergers can be profitable if you are able to trade on it.
Michael was Maher's brother. He regularly pushed Maher to give him information. Maher knew it was wrong but did it anyway because he loved his brother. Michael shared some of these hot tips with Salman. Salman was Michael's friend and Maher's wife's brother. Salman made about $1.5 million trading on these tips before the SEC caught them all.
Think through the insider trading theories we've discussed. Which might apply to Salman? Did Salman owe a duty of confidentiality? Was Salman an insider? Would it have made a difference if Salman paid for the tips?
The terms "tipper" and "tippee" refer to individuals involved in the communication or exchange of material non-public information. The tipper is the person who provides or shares the confidential information, while the tippee is the recipient of that information. The tippee may engage in insider trading by trading on the information or by passing it on to others for trading purposes in exchange for a personal benefit.
Tipper and tippee claims are based on violations of Section 10 of the '34 Act, so enforcement can be brought by the SEC, the Department of Justice of the counterparties to the trade. The SEC actively examines unusually timed trades. Penalties include disgorgement, fines and imprisonment
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