Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

U.S. v Newman Insider Trading Case Awaits SCOTUS Review

Author: Dan Brecher

Date: June 27, 2016

Key Contacts

Back

Growing Circuit Split Over United States v Newman Insider Trading Case

In convicting a Massachusetts attorney of insider trading, the First Circuit Court of Appeals declined to impose the higher standard established by the Second Circuit in the United States v. Newman insider trading case. The decision adds to the circuit split regarding insider trading cases, which should be resolved by the U.S. Supreme Court next term.

United States v Newman Insider Trading

The Second Circuit’s Decision in Newman

In Newman, the Second Circuit made it significantly more difficult for prosecutors to win insider trading cases involving “remote tippees” who lack a direct relationship with the individual who disclosed the confidential information. It specifically held that that in order to sustain a conviction for insider trading, the prosecution must prove beyond a reasonable doubt that the tippee knew that an insider disclosed confidential information and that he did so in exchange for a personal benefit. With regard to establishing a personal benefit, the appeals court further ruled that the prosecution must provide “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.” 

The First Circuit’s Insider Trading Decision

The First Circuit case, United States v. Parigian, involved information that Douglas Parigian received from his golfing buddy, who also happened to be a corporate insider. As alleged in the indictment, the tipper, Eric McPhail, solicited “getting paid back” by Parigian with wine, steak, and visits to a massage parlor. Parigian assured him that “I will take you for a nice dinner at Grill 23” (a high-end Boston steak restaurant).

In upholding Parigian’s conviction, the First Circuit held that that “the indictment’s allegations of a friendship between McPhail and Parigian plus an expectation that the tippees would treat McPhail to a golf outing and assorted luxury entertainment is enough to allege a benefit if a benefit is required.” While the panel acknowledged the Newman decision, it noted that, as a three-judge panel, it was bound by the First Circuit’s controlling precedent.

Supreme Court Review Next Term

Thankfully, the growing circuit split will likely be resolved next term. While the Supreme Court denied a petition to consider the Newman decision, the justices appeared to have had a change of heart. In January, the U.S. Supreme Court agreed to hear , which also involves whether the requisite personal benefit requires something more than just a close personal or family relationship. The specific question that will be addressed is:

Does the personal benefit to the insider that is necessary to establish insider trading under Dirks v. SEC, 463 U.S. 646 (1983), require proof of “an exchange that is objective, consequential, and represents at least a potential gain of a pecuniary or similarly valuable nature,” as the Second Circuit held in United States v. Newman or is it enough that the insider and the tippee shared a close family relationship, as the Ninth Circuit held in this case?

We will be closely following the status of this case and encourage our readers to check back for updates this fall.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business post image

The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business

Since his inauguration two months ago, Donald Trump’s administration and the Congress it controls have indicated important upcoming policy changes. These changes will impact financial services policies and priorities. The changes will particularly affect cryptocurrency, as well as banking rules and regulations. Key Regulatory Changes in Cryptocurrency For example, in the burgeoning cryptocurrency business environment, […]

Author: Dan Brecher

Link to post with title - "The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business"
Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1 post image

Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1

The retail sector has experienced a wave of bankruptcy filings over the last year. Brick-and-mortar businesses in financial distress include big-name brands like Big Lots, Party City, The Container Store, and Vitamin Shoppe. When large retailers seek bankruptcy protection, they are not the only businesses impacted. Landlords can be particularly hard hit. While commercial landlords […]

Author: Brian D. Spector

Link to post with title - "Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1"
How Understanding Bankruptcy Trends Can Benefit Your Business post image

How Understanding Bankruptcy Trends Can Benefit Your Business

The bankruptcy legal landscape presents both challenges and opportunities for businesses navigating financial distress. Understanding current bankruptcy trends can help businesses make more informed and strategic decisions. Corporate Bankruptcy Filings Trending Upwards Bankruptcy filings continued to trend upwards in 2024. According to statistics released by the Administrative Office of the U.S. Courts, personal and business […]

Author: Brian D. Spector

Link to post with title - "How Understanding Bankruptcy Trends Can Benefit Your Business"
SEC Takes Actions Against Issuers for Failure to File Form D post image

SEC Takes Actions Against Issuers for Failure to File Form D

In December, the U.S. Securities and Exchange Commission (SEC) announced charges against two privately held companies for failing to file a Form D notice, which is generally utilized for exempt securities offerings. Here, the SEC’s enforcement sends a strong message: compliance with regulatory requirements is not optional and failure to comply can have significant consequences. […]

Author: Kenneth C. Oh

Link to post with title - "SEC Takes Actions Against Issuers for Failure to File Form D"
Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda post image

Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda

On February 14, 2025, the Office of General Counsel (OGC) of the National Labor Relations Board (NLRB) under Acting General Counsel William B. Cowen issued Memorandum 25-05, “New Process for More Efficient, Effective, Accessible and Transparent Case handling.” The Memorandum rescinds nearly all of the Memoranda issued by his direct predecessor, Jennifer Abruzzo, setting the […]

Author: Matthew F. Mimnaugh

Link to post with title - "Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda"
What Are FIRPTA Withholding Requirements? post image

What Are FIRPTA Withholding Requirements?

If you purchase real property from a foreign person or entity, you may be required to withhold taxes from your payment to the seller under the Foreign Investment in Real Property Tax Act (FIRPTA). The federal tax law is designed to ensure that foreign sellers pay any applicable capital gains tax on profits realized from […]

Author: Jesse M. Dimitro

Link to post with title - "What Are FIRPTA Withholding Requirements?"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!

Please select a category(s) below: