Question

Case: Salman v. United States 137 S. Ct. 420

Facts:  Maher and Michael Kara were brothers. As an investment banker, Maher learned about companies that were secretly developing innovative medical treatments. When their father became ill, Maher shared information about these companies with his brother. Eventually Maher realized that Michael was trading on this secret information. Although Maher disapproved of Michael’s trades and implored him to stop, Maher continued to give his brother tips.

When Maher started dating &and ultimately married) Bassam Salman’s sister, Michael and Salman became friends. Without telling Maher, Michael began sharing Maher’s tips with Salman, who made over $1.5 million in profits. Salman knew the information was coming from Maher.

All three men were charged with insider trading. Michael and Maher pleaded guilty and testified against Salman at his trial., (Talk about awkward family dynamics.) Salman was convicted of insider trading and sentenced to 36 months in prison. He appealed, arguing that he was not guilty of insider trading because the tipper (Maher) had not received a benefit. The Supreme Court granted certiorari.

Issue: Did the tipper receive a benefit? Did Salman engage in illegal insider trading?

Question: Who was the tipper in this case?

Question: Who was the tippee?

Question: How is Maher guilty of insider trading? What did he do wrong?

Answer 1

Question :  Did the tipper receive a benefit? Did Salman engage in illegal insider trading?    Answer : Yes . Here there are two tippers - Maher and Michael.   Yes. Salman engaged in illegal insider trading as he traded for his own stock on the basis of material non - public information and earned profit.

Question:  Who was the tipper in this case? Answer :  In this case, there are 2 tippers Mahel and Maichael. Maher passed the material non-public information with Michael and Michael passed it on Salman.

Question: Who was the tippee? Answer : Salman and Michael are the tippees.

Question: How is Maher guilty of insider trading? What did he do wrong? Answer :  Maher is guilty of insider trading because he traded on the basis of material non-public information.