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Supreme Court Rejects Newman Requirement of “Pecuniary or Similarly Valuable” Personal Benefit for Insider Trading Liability for Tipping Family and Friends (continued trom page 1) as a personal benefit necessary to be held liable for insider trading.? Sa/man will almost certainly embolden the SEC and federal prosecutors to bring more insider trading cases, because it is much easier for the government to prove a “gift” to a “friend” than to prove a “pecuniary” or similar quid pro quo. In Sa/man, an investment banker at Citigroup tipped his brother about certain pending health- care mergers involving Citigroup clients. The brother traded on that information for a profit, and also tipped his brother-in-law, Mr. Salman, who also traded for a profit. At trial, the govern- ment relied solely on the tippers giving a gift of inside information to a close family member to satisfy the “personal benefit” requirement of tip- per-tippee insider trading liability. The government did not identify any money or other valuable quid pro quo paid for the tip. Salman was convicted at trial, and his conviction was upheld by the Court of Appeals for the Ninth Circuit. (continued on page 3) Client Alert: Status of the New DOL Fiduciary Rule (continued from page 1) a better commission for the adviser. The Obama administration found that conflicted advice cost savers about $17 billion a year based on a 2015 report. To be clear, the Rule applies only to retire- ment accounts like 401(k)s and individual retire- ment accounts (“IRAs”), not to regular taxable accounts. According to the Investment Company Institute, Americans invest $7.8 trillion in IRAs and $7 trillion in 401(k)s. On January 20, 2017, the DOL issued two new sets of Frequently Asked Questions (“FAQs”) on the Rule. One of the sets of FAQs focuses on the new definition of fiduciary investment advice and the other set is geared toward retirement investors and consumers, covering consumer protection features of the new Rule. This is the second of three rounds of guidance to be pub- lished by the DOL prior to the effective date of the new Rule. The Executive Branch also issued responses to the Rule on January 20, 2017. The White House issued a Memorandum from Reince Priebus to the heads of the executive departments and agencies requesting a sixty (60)-day delay as the effective date of regulations published in the Office of the Federal Register have not taken effect as of yet. On February 3, 2017, President Trump signed a presidential memorandum to delay the Rule by six (6)-months, casting doubt on its viability. The memorandum instructs the DOL to conduct a new “economic and legal analysis’ to deter- mine whether the Rule is likely to harm inves- tors, disrupt the industry or cause an increase in litigation and the price of advice. If the DOL concludes that the regulation does hurt inves- tors or firms, it can propose a rule “rescind- ing or revising” the regulation. On March 1, 2017, the DOL issued a proposed rule, which will extend the applicability date of its fidu- ciary rule, including the Best Interest Contract Exemption, from April 10, 2017 to June 9, 2017, a 60-day delay. Some are saying the Rule would hurt investors because it would supposedly make it harder for people to receive retirement advice. For example, advisers would not be able to afford to service low-balance retirement accounts. On the other hand, consumer, labor and civil rights groups have pushed for the Rule saying that the current system provides a loophole that lets brokers drain money from retirement accounts in fees they receive that can sway the investment advice they give their retire- ment accounts. We see that many retirement advisers already have chosen to act in their clients’ best interests, opting to work under the fiduciary standard—it is ultimately a business advantage. The FAQs are available on the DOL’s website and the Memoranda are available on the White House Press Office website. FAQs https://www.dol.gov/sites/default/files/ebsa/ about-ebsa/our-activities/resource-center/ faqs/coi-rules-and-exemptions-part-2. pdf https://www.dol. gov/sites/default/files/ebsa/ about-ebsa/our-activities/resource-center/faqs/ consumer-protections-for-retirement-investors- your-rights-and-financial-advisers.pdf Memoranda January 20, 2017—Regulatory Freeze Pending Review https://www.whitehouse.gov/the-press- office/2017/01/20/memorandum-heads-execu- tive-departments-and-agencies February 3, 2017—Fiduciary Duty Rule https ://www.whitehouse.gov/the-press-office/ 2017/02/03/ presidential-memorandum-fiduciary- duty-rule Daniel G. Viola is a Partner and the Head of the Regulatory and Com- pliance Group. He structures and organizes broker-dealers, invest- ment advisers, funds and regularly counsels investment professionals in connection with regulatory and corporate matters. Mr. Viola served as a Senior Com- pliance Examiner for the Northeast Regional Office of the SEC, where he worked from 1992 through 1996. During his tenure at the SEC, Mr. Viola worked on sev- eral compliance inspection projects and enforcement actions involving examinations of registered invest- ment advisers, ensuring compliance with federal and state securities laws. Mr. Viola’s examination experi- ence includes financial statement, performance adver- tising, and disclosure document reviews, as well as, analysis of investment adviser and hedge fund issues arising under ERISA and blue sky laws. Dan can be reached at 212.573.8038, or dviola@sglawyers.com. HOUSE_OVERSIGHT_019857