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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.

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.”