It is likely that insider trading in the US will in future include the situation where the information is disclosed with the expectation that the recipient would trade on it and the disclosure resembles trading by the insider, resulting in the gift of the profits to the recipient.
In United States v Martoma the insider was a corporate investor relations employee who shared information with an analyst employed by an institutional investor. Up to now the question has been whether the person giving the tip-off breached the duty for a ‘personal benefit’. This could be either a financial benefit or where the information was given to a close friend or relative and the insider had no legitimate business reason for sharing the information. In the latter circumstances the court inferred that there was a personal benefit. This test did not deal with the facts before the court in Martoma.
The court therefore extended the test to the one described, where the expectation is of personal benefit to the recipient of the information. The decision will go on review and this may not be the last word.
