On June 25, 2018, the Second Circuit amended its decision affirming the insider trading conviction of hedge fund portfolio manager Matthew Martoma. As in the initial decision, Judge Rosemary Pooler dissented. The panel in its amended opinion again sought to clarify the standard for the “personal benefit” a tipper must receive to establish insider trading liability.

In its first opinion (Martoma I), the panel held that an insider tipper personally benefits from the disclosure of inside information when that information is disclosed with the expectation that the recipient will trade and the disclosure resembles the trading by the insider, who thereafter makes a gift of the profits. The Martoma I majority opinion found that Newman’s additional requirement—that the government prove in gift cases that the tipper and tippee had a “meaningfully close relationship”—was inconsistent with the Supreme Court’s decision in Salman. The panel’s amended decision (Martoma II) clarified that the personal benefit element may be established by proving either that: (1) the tipper “intended to benefit” the tippee—regardless of whether the tipper and the tippee had a pre-existing relationship; or (2) the relationship between the insider and the recipient suggests a quid pro quo.

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