Maher Kara was an investment banker specializing in the healthcare industry at Citigroup. To understand scientific aspects of his job, Maher sought help from his older brother Michael, who was a chemist. Later, when their father was ill, Maher told his brother about companies that were secretly developing innovative treatments. Eventually Maher realized that Michael was trading on this secret information.

Maher implored Michael to stop, even offering him money. But Michael just wanted information. Although he disapproved of Michael’s trades, Maher continued to feed him tips, knowing that he would trade on it.

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, sentenced to 36 months’ imprisonment, and ordered to pay over $730,000 in restitution. He appealed, arguing that he was not guilty of insider trading because the tipper (Maher) had not received a benefit. The Ninth Circuit affirmed his convict ion. The Supreme Court granted certiorari.

Questions:

1. Did the tipper receive a benefit? Did Salman engage in illegal insider trading?

2. Who was the tipper in this case?

3. Who was the tippee?

4. When Maher began to give his brother inside information, did he know his brother would trade on it?

5. After Maher learned that Michael was trading on the information, did he stop giving inside tips? 

6. If Maher had traded on the confidential information himself, would he have been guilty of insider trading? 

7. How is Maher guilty of insider trading? What did he do wrong?