A closely watched legal battle over the finer points of insider trading law concluded in the Supreme Court Tuesday with the unanimous opinion that a brother's ineffable, undying love can indeed constitute the quid in a quid pro quo.
The case, Salman v. U.S., asked whether the government could pin insider trading on someone when the source of the insider info received no cash or tangible benefit in return. In the case of Bassam Salman, who profited just shy of $1 million on trading ahead of a merger announcement, the hot tip came courtesy of Mounir Kara, who got the info from his brother Maher Kara, a Citigroup banker.
Salman's lawyers argued that since the Citi banker got nothing in return for his generosity, the tip didn't qualify under the recently tightened standards for determining what really counts as insider trading. In a previous 2014 decision, SCOTUS found that just being friends with someone wasn't enough to establish insider trading, “in the absence of 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.”
But a brother's love? That makes the cut. “Salman’s jury was properly instructed that a personal benefit includes ‘the benefit one would obtain from simply making a gift of confidential information to a trading relative,’” Justice Samuel Alito wrote in the unanimous decision. The warm fuzzy feeling of fraternal geniality is tantamount to cash in hand.
But what difference, other than the sentimentality of blood ties, is there between brothers sharing material nonpublic information and friends doing the same? Does a favor for a sibling involve “at least a potential gain of a pecuniary or similarly valuable nature,” while one for a friend does not? Aren't we genetically predisposed to be altruistic with kin – which, one would think, makes favors between siblings less liable to personally benefit one or the other?
Who knows. There's at least one person, though, who surely personally benefits from the decision: Preet Bharara. Eat your heart out, Preet.