Salman v. United States Page 16

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Media for Salman v. United States

Audio Transcription for Oral Argument - October 05, 2016 in Salman v. United States

Alexandra A. E. Shapiro:

"The SEC," the Court said, "appears to contend that an insider invariably violates the fiduciary duty of the corporation shareholders by transmitting nonpublic corporate information to an outsider when he has reason to believe that the outsider may use it to the disadvantage of the shareholders." And the Court rejected that argument. And later in the footnote, the Court talks about the dissent's argument.

And the dissent argued, the Court said, by perceiving a breach of fiduciary duty whenever inside information is intentionally disclosed to securities traders, the dissenting opinion will achieve the same result that the Court had rejected in Chiarella and rejected again; that is, effectively, a parity of information rule.

So the government test is inconsistent with Dirks. Furthermore, as I believe Mr. Dreeben mentioned, one of the points in the section of the opinion that discusses the test is the concern that courts shouldn't have to read the party's minds as to this element of the offense as opposed to scienter, and to the extent the government claims that there's an intentionality element to the breach of duty, that would violate that suggestion in the Dirks case as well. And finally, with respect to the whole remote tippee concept in Petitioner in this case, in this case Petitioner had no idea why Maher Kara was disclosing information to his brother.

The only thing the record shows is that there was testimony that Michael told him the information came from the brother. There was no evidence he had any idea why, and as I believe Justice Sotomayor pointed out earlier, there were three different reasons at various points that information was disclosed.

One was so that he could educate himself about the science of the work that he was doing.

One was so that they could discuss potential drugs for their ailing father.

And then there was the third phase. But there was no evidence whatsoever that Petitioner had any idea why the information was being disclosed. And finally, with regard to the point about the congressional statute, the fact of the matter is, if Congress could be said to have --

John G. Roberts, Jr.:

Finish your sentence.

Alexandra A. E. Shapiro:

-- if Congress could be said to have ratified anything, all it could be said to have ratified is that there is an insider trading ban. There's no indication that Congress ever ratified the Dirks gift language. Thank you.

John G. Roberts, Jr.:

Thank you, counsel. The case is submitted.