Federal securities-fraud statutes don’t specifically mention insider trading, but in 1983 the Supreme Court said prosecutions could be based on an insider’s breach of a duty to the company’s shareholders. The ruling said the insider had to receive a "personal benefit" from the disclosure.

‘Making a Gift’

Justice Anthony Kennedy said Wednesday that he read that ruling, known as Dirks, as allowing prosecution when the insider gave the information without expecting compensation.

"Dirks says there is a benefit in making a gift," Kennedy said.

A ruling favoring the government would only partially undo the New York court ruling’s impact on Wall Street. The government won’t be able to revive cases that have already been dismissed -- like the one against SAC Capital Advisors LP’s Michael Steinberg.

In addition, the Supreme Court isn’t taking on a key part of the Newman ruling: its requirement that prosecutors prove the person trading on the information knew that it came from an insider who received a personal benefit.

The case is Salman v. United States, 15-628.

This article was provided by Bloomberg News.

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