For the Defense - Volume 2, Issue 2 - 2017 - 35

was involved? Courts have come to different
conclusions about how specific the tippee's
knowledge of the insider's personal benefit
must be.36
And even assuming the most basic form
of knowledge, what proof of that knowledge
is required? In Newman, for example, the
government contended that "the specificity,
timing, and frequency" of the information the
defendants received was so "overwhelmingly
suspicious" that they "must have known, or
deliberately avoided knowing, that . . . insiders disclosed the information in exchange
for a personal benefit."37 The Second Circuit
swiftly rejected that argument, holding that
the nature of the information "cannot, without more, permit an inference as to th[e]
source's improper motive for disclosure."38
Although direct tippees will seldom be able
to plausibly deny knowledge of the tipper's
personal benefit, these lingering uncertainties post-Salman provide strong arguments
for remote tippees like the defendants in
Newman, who often do not know the specific
circumstances of the initial disclosure or even
the identity of the source.

Conclusion
Unlike the European Union and many other countries, the United States lacks a federal criminal
statute that specifically proscribes insider trading.
Investors and securities traders thus depend on the
judiciary to delineate the boundaries of the criminal offense. Much remains undefined in the wake
of Salman, making it difficult to advise clients but
opening several avenues of defense after charges
are brought. These issues are likely to percolate in
the lower courts for some time until the Supreme
Court weighs in again.

Notes
1.

2.
3.

The authors represented the petitioner in Salman and
defendants in United States v. Newman and United
States v. Goffer, discussed infra. Ms. Shapiro also
represents the appellants in United States v. Martoma
and United States v. Whitman.
137 S. Ct. 420 (2016).
Dirks v. SEC, 463 U.S. 646 (1983).
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About the Author
Alexandra A.E. Shapiro is a partner and co-founder of Shapiro Arato LLP, a New
York litigation boutique firm. Her practice focuses principally on white collar
defense and appeals. Over the past decade, Ms. Shapiro has won a series of
appellate victories in significant cases for clients convicted of insider trading,
tax fraud, accounting fraud, wire fraud, and obstruction of justice. She is a Past
President of the New York Council of Defense Lawyers, a non-profit association
of criminal defense lawyers practicing in the federal courts in New York. She has
also served as Deputy Chief Appellate Attorney in the U.S. Attorney's Office for
the Southern District of New York and clerked for Justice Ruth Bader Ginsburg
of the Supreme Court of the United States.
Daniel J. O'Neill is counsel at Shapiro Arato LLP. He represents clients in white
collar criminal matters at the investigatory, trial and appellate levels, and in
complex civil litigation. He also has extensive experience conducting internal
investigations for corporate boards and management.

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