Document: 521 U.S. 642117 S.Ct. 2199138 L.Ed.2d 724 UNITED STATES, Petitioner,v.James Herman O'HAGAN. No. 96-842. Supreme Court of the United States Argued April 16, 1997. Decided June 25, Syllabus * After Grand Metropolitan PLC (Grand Met) retained law firm Dorsey & Whitney to represent it regarding a potential tender offer for Pillsbury Company's common stock, respondent O'Hagan, partner who did no work on representation, began purchasing call options as well shares stock. Following Whitney's withdrawal from Met publicly announced its offer, price stock rose dramatically, and O'Hagan sold his at profit more than $4.3 million. A Securities Exchange Commission (SEC) investigation culminated in 57-count indictment alleging, inter alia, that defrauded client, Met, by misappropriating own trading purposes material, nonpublic information offer. The charged with securities fraud violation §10(b) Act 1934 SEC Rule 10b-5, fraudulent connection §14(e) 14e-3(a), violations federal mail money laundering statutes. jury convicted all counts, he was sentenced prison. Eighth Circuit reversed convictions, holding 10b-5 liability may not be grounded "misappropriation theory'' which prosecution relied; 14e-3(a) exceeds SEC's rulemaking authority because contains breach fiduciary duty requirement; convictions rested laws, so could stand once were reversed. Held: 1.A person trades personal profit, using confidential misappropriated source information, held liable violating 10b-5. Pp. ____-____. (a) Section 10(b) proscribes (1) any "deceptive device'' (2) "in purchase or sale security,'' contravention rules. adopted pursuant authority; under does extend beyond conduct encompassed §10(b)'s prohibition. See, e.g., Ernst v. Hochfelder, 425 185, 214, 96 1375, 1391, 47 668. Under "traditional'' "classical insider liability, occurs when corporate corporation's basis has obtained reason position. Such qualifies there is relationship trust confidence between shareholders gives rise disclose abstain trading. Chiarella States, 445 222, 228-229, 100 1108, 1114-1115, 63 348. complementary urged Government here, "outsider'' violates misappropriates purposes, owed rather persons whom trades. (b) Misappropriation, just defined, proper subject charge meets statutory requirement "deceptive'' with'' transaction. First, misappropriators deal deception: pretends loyalty principal while secretly converting principal's gain dupes defrauds principal. company's property company right exclusive use; undisclosed misappropriation such constitutes akin embezzlement. Cf. Carpenter 484 19, 25-27, 108 316, 320-321, 98 275. Deception through nondisclosure central theory. theory thus consistent Santa Fe Industries, Inc. Green, 430 462, 473-476, 97 1292, 1300-1302, 51 480, decision underscoring an all-purpose ban, but trains manipulative deceptive. Conversely, full disclosure forecloses liability: Because deception essential involves feigning fidelity information's source, if discloses plans trade violation. Second, misappropriator's deceptive use [a] security'' satisfied fiduciary's consummated, obtains when, without principal, uses selling securities. transaction coincide, even though entity other party trade, is, instead, information. misappropriated, both deceives harms members investing public, tuned animating purpose Act: ensure honest markets, thereby promoting investor confidence. It would make scant sense hold lawyer-turned-trader like violator works representing target bidder. statute's text requires result. (c) erred inconsistent §10(b). court understood require neither misrepresentation nor nondisclosure; this explains, however, Concretely, O'Hagan's failure Dorsey, do so, made misread Court's precedents ruled that, 230, 232, 233, 1115-1116, 1116-1117, 1117, 348; Dirks SEC, 463 646, 655, 103 3255, 3261-3262, 77 911; Central Bank Denver, N.A. First Interstate N. A., 511 164, 191, 114 1439, 1455, 128 119, only parties transaction, or, most, market participants investors, sufficient give liability. Chiarella, supra, 238, 239, 240-243, 245, S.Ct., 1119-1120, 1120, 1120-1122, 1123, expressly left open question theory's validity, Dirks, 665, 666-667, 3267, 3267-3268, also room application cases one. Bank's discussion concerned private civil litigation criminal (d) Vital sustained Act's prove "willfully'' violated order establish violation, provision defendant imprisoned proves had knowledge Rule. culpable intent weakens too indefinite permit imposition See Boyce Motor Lines, 342 337, 342, 72 329, 331-332, L.Ed. 367. address remand challenges convictions. 2.As relevant case, exceed adopting requiring showing issue entailed duty. 14(e) prohibits "fraudulent . acts offer,'' authorizes "define, prescribe means reasonably designed prevent, acts.'' Adopted authorization, forbids concerns knows should know been acquired offeror issuer, someone working their behalf, unless within reasonable time before are disclosed. imposes whether trader owes respect confidentiality In invalidating reasoned, empowers identify regulate "fraudulent'' acts, create definition "fraud''; Schreiber Burlington Northern, Inc., 472 1, 7-8, 105 2458, 2461-2462, 86 interpretations guide construction §14(e); 228, can speak arising out similar This need resolve fraud-defining broader §10(b), applied genre, "means prevent'' context. prophylactic measure properly encompasses core activity prohibited. §14(e), prohibit themselves prohibition prevent practices fraudulent. Schreiber, 11, n. 2464, 11. must accord assessment regard controlling weight arbitrary, capricious, manifestly contrary statute. Chevron U.S.A. Natural Resources Defense Council, 467 837, 844, 104 2778, 2782-2783, 81 694. none these. fair assumption will often involve bidder representatives. cognizant proof problems enable sophisticated traders escape responsibility trading, placed "disclose trading'' command specific Insofar serves type against therefore exercise power §14(e). declines consider first instance alternate arguments 14e-3(a)'s pre-offer conflicts due process. argument preserved. 3.This rulings issues reversal Circuit's judgment counts. attacking grounds, have addressed Circuit, remain consideration remand. 92 F.3d 612 (C.A.8 1996), remanded. GINSBURG, J., delivered opinion Court, STEVENS, O'CONNOR, KENNEDY, SOUTER, BREYER, JJ., joined, Parts I, III, IV SCALIA, joined. filed concurring part dissenting part. THOMAS, part, REHNQUIST, C. Michael R. Dreeben, Washington, DC, petitioner. John D. French, respondent. Justice GINSBURG Court. 1 case interpretation enforcement 1934, rules these provisions, 14e-3(a). Two prime questions presented. relates trading; second setting. particular, we issues: Is guilty 10b-5? Did setting, absence disclose? Our answer yes, question, viewed context no. 2 Respondent James Minneapolis, Minnesota. July 1988, Met), based London, England, local counsel Company, headquartered Minneapolis. Both took precautions protect Met's plans. representation. withdrew September 9, 1988. Less month later, October 4, 3 On August 18, still Each option gave him specified date Later September, additional purchases options. By end owned 2,500 unexpired options, apparently individual investor. App. 85, 148. purchased, some 5,000 $39 per share. When October, nearly $60 then making 4 (SEC Commission) initiated into transactions, culminating indictment. alleged planned Id., 8.1 According indictment, used profits gained conceal previous embezzlement conversion unrelated client funds. 10.2 20 counts fraud, 18 U.S.C. §1341; 17 (Exchange Act), 48 Stat. 891, 15 §78j(b), CFR §240.10b-5 (1996); Act, §78n(e), §240.14e-3(a) statutes, §§1956(a)(1)(B)(i), 1957. 13-24. 57 41-month term imprisonment. 5 divided panel Appeals (1996). Liability held, relied. 622. 14e-3(a)-which possession relating offer-exceeds rule requirement. 627. further concluded 627-628. Judge Fagg, dissenting, stated recognize enforce theory, 628. 6 Decisions Courts conflict propriety see infra page 3, legitimacy infra, __. We granted certiorari, 519 ----, 117 759, 136 695 (1997), now reverse judgment. II 7 Appeals' Fourth lead, Bryan, 58 933, 943-959 (1995), rejected hold, several Appeals,3 predicated theory.4 8 pertinent provides: 9 "It shall unlawful person, directly indirectly, instrumentality interstate commerce mails, facility national exchange- 10 ..... 11 " To employ, security registered exchange registered, device contrivance regulations [Securities Exchange] necessary appropriate public interest protection investors.'' §78j(b). 12 statute securities, prescribed Commission. provision, written, confine coverage purchaser seller Newman, 664 F.2d 12, (C.A.2 1981); rather, reaches security.'' 13 Pursuant authority, which, 14 commerce, mails exchange, employ device, scheme, artifice defraud, [or] 16 engage act, practice, course business operates operate deceit upon 19 our precedent indicates, 668 (1976) (scope cannot Congress §10(b)); 173, 1446, 119 (1994) ("We refused allow [private] prohibited statute.''). corporation Trading affirmed, "a [exists] those insiders position corporation.'' 1114, 348 (1980). That relationship, recognized, "gives [or trading] "necessity preventing tak[ing] unfair advantage uninformed stockholders.''' 1115 (citation omitted). classical applies officers, directors, permanent corporation, attorneys, accountants, consultants, others temporarily become fiduciaries corporation. 14, 3262, 911 (1983). 21 holds commits Brief 14. undisclosed, self-serving sell confidentiality, lieu premising premises fiduciary-turned-trader's entrusted access 22 two theories complementary, each addressing efforts capitalize targets insider's transacts; outlaws party, "protec[t] integrity markets abuses "outsiders' affect th[e] revealed, owe shareholders.'' Ibid. 23 firm, Whitney, traded 16. conduct, charged, constituted securities.5 B 24 agree misappropriation, satisfies chargeable contrivance'' observe, first, misappropriators, describes them, deception. [pretends] gain,'' 17, "dupes'' Aldave, Misappropriation: General Theory Nonpublic Information, Hofstra L.Rev. 101, (1984). 25 same species 275 (1987), involved proscription "any scheme defraud,'' §1341. Affirming statute, said employee's undertaking reveal employer's "became sham'' employee provided co-conspirators obtain profits. U.S., 27, 321. recognized Carpenter, use. 320-321. duty, embezzlement-""the appropriation one's goods care another.''' 317 (quoting Grin Shine, 187 181, 189, 98, 101-102, 130 (1902)); L.Rev., 119. Carpenter's misuse notes, "is particularly apt guidance [the statute] (like 10(b)) long deception, merely duty.'' 26 seeks recognition. As explanation oral argument: "To satisfy trustee [has] [to] him, consent. disclosure.'' Tr. Oral Arg. 12; generally Restatement (Second) Agency §§390, 395 (1958) (agent's obligation information).6 27 advanced 480 (1977), ban; involving manipulation id., 1300-1302. contrast Government's allegations facts disclosed 474, 1301; therefore, provisions attach, 476, 1302. Similarly, theory: violation-although fiduciary-turned-trader state loyalty.7 28 turn next element gains coincide. 120 ("a practiced one resultant harm another group persons''). misappropriator short, advantageous deception; simultaneously public. 120-121, 107. 29 sort ordinarily no-risk Should put use, implicated. catch conceivable forms information; catches capitalizing transactions. 30 notes limitation reaches: "The apply bank giving loan embezzled cash another, proceeds misdeed securities.'' 24, 13. states, "the value malefactor apart complete soon obtained.'' words, buy, anything, least many things; sufficiently detached subsequent met. 31 dissent's incoherent funds, multiple uses, post, __-__, misses point. enacted "to insure maintenance markets,'' §78b, fall hardly remarkable suitably certain kinds stretched money. 32 dissent overstatement. Observing manner purchases, urges kind derives utility 10, 21; __-__ (several times emphasizing word "only''). Substitute "ordinarily'' "only,'' mark.8 33 recognition "only'' overstatement provoked cry "new theory.'' __-__. But very relies, Vehicle Mfrs. Assn. State Farm Mut. Automobile Ins. Co., 29, 2856, 443 (1983), shows extremity charge. Farm, reviewed agency's rescission "arbitrary capricious'' standard promulgation judged, 41-42, 2865-2866; concluding agency adequately explained regulatory action, 57, 2873-2874, cautioned "reviewing attempt itself up deficiencies,'' 43, 2867. Here, contrast, 10b-5's challenged; falls prohibitions context, acknowledge simply defending lawyers pressed solid point far, something lawyers, occasionally judges, wont do. 34 comports language, identifiable seller. well-tuned promote 45 Fed.Reg. 60412 (1980) (trading "undermines of, in, markets''). Although informational disparity inevitable investors likely hesitate venture capital where unchecked law. An investor's disadvantage vis-a-vis stems contrivance, luck; overcome research skill. Brudney, Insiders, Outsiders, Informational Advantages Federal Laws, 93 Harv. 322, 356 (1979) ("If thought systematically populated transactors [trading information] refrain dealing altogether, incur costs avoid corruptly unerodable advantages.''); 122-123. 35 sum, considering inhibiting impact participation congressional underlying makes lawyer result.9 here C 36 primarily grounds. comprehended nondisclosure. F.3d, 618. explained, issue. "it [was O'Hagan's] ma[de] "deceptive' meaning [§]10(b).'' Reply 7. 37 Second "more obvious,'' said, moored security.''' 618 §78j(b)). three decisions information: (1980); (1983); (1994). [O]nly transaction,'' concluded, "or, liability.'' read differently, note again refers purchasers sellers 38 printer employed shop printed documents announcing takeover bids. 224, 1112. Deducing names companies handled, bought bids announced, expecting (correctly) share prices announcement. (the companies' shareholders) traded. ibid. For affirmed conviction. 225, 1113. 39 instructed convict willfully failed inform knew bid increase shares. 226, 1113-1114. Emphasizing sellers, imposed broad 235, 1118. There "general transactions forgo actions information.'' 1117. established doctrine, "arises parties.'' 40 prompting shareholders. evident response printer's employer trading-in acquiring companies-constituted security, terms 235-236, 1118-1119. declined reach submitted jury. 236-237, four Justices found merit it. 1120 (Brennan, judgment); 1120-1122 (Burger, dissenting); 1123 (Blackmun, joined Marshall, dissenting). And fifth "wisely le[ft] resolution day.'' (Stevens, concurring). 41 us today. Certain statements led instant conclude hinges exclusively premised '' (emphasis added), observed printshop "was confidence,'' These notion stretches far impose general information,'' them highlighted appear carefully leaving future validity foreclose 42 too, confront.10 investment analyst received former connection. 648-649, 3258-3259. indicated engaged massive fraud. investigated obtaining corroborating employees During investigation, discussed findings clients holdings suspected gross wrongdoing. 649, 43 censured for, aiding abetting passed on. 650-652, 3259-3260. view, analyst, "tippee'' insiders, communicating 651, 655-656, 3261-3262. obligation, 665-667, 3266-3268, repeated key Chiarella: ""general information.''' 3261 1117); 122 (misappropriation bars "trading wrongdoer converted fiduciary, contractual, owner rightful possessor information''). 44 No "tippers'' disclosing about employer. acted expose 3267-3268. Absent tippers, derivative tippee. 667, Most important Dirks: "There expectation analyst's] sources keep Nor analyst] misappropriate illegally 3267. presents suggestion escapes alerting Last regarded warranting disapproval plaintiff maintain suit §10(b).'' 1455. immediately secondary actors sometimes Acts: "Any entity, including lawyer, accountant, bank, employs material misstatement (or omission) relies primary assuming requirements met.'' added). isolated statement quoted drew conclusion covers omissions perhaps participants, rely. 619. presented Bank, passage, sought clarify actors, although conduct. 46 Furthermore, reference light longstanding suits. Blue Chip Stamps Manor Drug Stores, 421 723, 95 1917, 539 (1975), actual action confined "policy considerations.'' 737, 1926. abuse inherent suits sold, asserted they absent others. 739-747, 1927-1931; Holmes Investor Protection Corporation, 503 258, 285, 112 1311, 1326-1327, 532 (1992) (O'Connor, 289-290, 1328-1329 (Scalia, judgment). Criminal prosecutions present dangers Stamps, "inapplicable'' indictments Naftalin, 441 768, 774, 6, 99 2077, 2082, 60 624 (1979); Holmes, 281, 1324-1325 judgment) (" [T]he purchaser/seller standing import willful provisions.''). examined opinion, precedent.11 emphasize, sturdy safeguards scienter. provision. §78ff(a).12 rule. ibid.13 30-33, fails limited addition, "requirement presence offense much destroy force [statute]'' circumstances unjust. 367 (1952). III 49 ground sole convictions: Commission, duty? extent authority. 50 governing reads part: fraudulent, deceptive, practices, [SEC] shall, subsection, define, manipulative.'' §78n(e). 52 14(e)'s sentence self-operating added 1968 Williams 82 454. section's delegates definitional delegation 1970 amendments Act. §5, 84 1497. 53 Through Act,14 "confronted [would] required respond adequate Rondeau Mosinee Paper Corp., 422 49, 58, 2069, 2076, (1975); Lewis McGraw, 619 192, 195 1980) (per curiam) ("very purpose'' "informed decisionmaking shareholders''). (1985), "disclosure, principles "fairness' "artificiality,' preferred method regulation.'' 8, 2463 8. 14(e), "supplements precise elsewhere explicitly 10-11, 2464. 54 Relying §14(e)'s 1980, promulgated 55 If taken substantial step steps commence, commenced, "offering person'), constitute act practice section [Exchange] indirectly from: 56 offering issuer (3) Any officer, director, acting behalf cause purchased convertible exchangeable dispose foregoing prior press release otherwise.'' 59 characterized 60410 (1980).15 concisely described rule's thrust: "One concerning pending "directly indirectly' behalf. creates ambit disclose, pre-existing Chestman, 947 551, 557 (1991) (en banc) cert. denied, 1004, 1759, 118 (1992). 61 Maio, 623, 635 (C.A.7 1995) ("Rule 14e-3 non-public stocks implicated impending regardless '') added); Peters, 978 1162, 1165 (C.A.10 1992) (as requirement). 62 breaches regulation 624, Contra, 634-635(CA7); F.2d, 1165-1167 (C.A.10); 556-563(CA2) (all authority). support holding, relied Chiarella. 624-627. homed essence authorization: "define' "prescribe prevent' "acts practices' "fraudulent.''' 624. All means, plain, "identify regulate,'' practices'' already defines "fraudulent''; but, maintained, "create fraud.'' (internal quotation marks 64 pointed out, "manipulative'' phrase "fraudulent, what §10(b): nondisclosure, indicted manipulative. 625 (citing 2462 6). added, 625, citing acknowledgment ""broad antifraud prohibition' [is] modeled 10b-5,'' omitted); 2464 10. 65 looked 625. recounted, ""a confidence.''' 1114 Torts §551(2)(a) (1976)). Just demands concluded. 66 Commission's stated: "Properly read, powers field offers, fixed alter way administrative rule.'' 67 reading misapprehends define them. "defining' power,'' submits, "would virtual nullity permitted go (which separately [self-operative] 14(e)).'' 11; 37. 68 maintaining Schreiber. 38-40. Parenthetically, "manipulative''; unlike "fraudulent,'' observes, ""manipulative' "virtually art markets.''' 38, 2461). tellingly, violate self-operative sentence, containing language points track proscribe "manipulative device[s] contrivance[s].'' 38. Instead, prescription tracks §15(c)(2)(D) §78o (c)(2)(D), broker-dealers over-the-counter markets. 38-39. Since 1938, 1075, §15(c)(2) given [broker-dealer] (c)(2)(D). 1970, 39, 22.16 69 "define fraudulent'' context.17 measure, mission typically noted authorization "latitude,'' "manipulative,'' nondeceptive activities "reasonably designed' suggesting change "manipulative' itself.'' accordingly, [that] fraudulent.'' §78n(e).18 70 authorized legislative rules, mere deference weight.'' Batterton Francis, 432 416, 424-426, 2399, 2406, 448 (1977). Therefore, determining "controlling [it is] statute.'' 2782, 694 conclude, these.19 71 abstain'' rule, explained: previously expressed continues serious results disparities disruption. Security holders effectively denied benefits substantive protections furnished able informed decision, deferring until disseminated commenced terminated.'' (footnotes 73 justified assure efficacy protections. 74 emphasizes difficult prove.'' "Particularly Tenth "there fairly wide circle people 1167, notably, bankers, accountants structuring availability lead abuse, "even hint upcoming send soaring.'' Materia, 745 197, 199 1984). Individuals long-term find temptation hard resist view large short-term potentially available [to them].'' 1167. 75 [I]t possible circumstantially [traded information], almost impossible either ultimate example illustrates problem. tippee assumes breached breach.'' 660, 3264. show known breach. "Yet, most cases, [information transfer] tippee.'' 1167.20 76 problem responsibility, prescription, satisfied, 560 ("While dispensing subtle associated demonstrating problematic area [Rule 14e-3(a)] retains close nexus aims.''); accord, 635, 14; 1167.21 insofar §14(e).22 affirming judgment, invalid advance offer-when commence'' taken-while offer.'' 41-42. contends covering "fails comport process levels'': "give notice occurs,'' 42; "disposes scienter requirement,'' 43. arguments, raise briefs court. decline contentions instance.23 78 Based dispositions §1341, Reversal "d[id] matter likewise reversed.'' 627 319-320, unanimously wire evenly defendants' convictions). structured charges disassociated charges, base charges.'' 627-628.24 79 irreconcilable Carpenter: "mail independent [the] [though] rest set facts.'' 46-47. linger over matter, well.25 80 note, attacked grounds; yet *** reversed, remanded proceedings opinion. 83 ordered. 85 I join agree, Part analysis respondent's entirely Thomas's either, principally seems me irrelevant why covered "coherent consistent,'' true matters accorded adjudicative policymaking discretion, supported reasons sets forth, Chenery 318 80, 94, 454, 87 626 (1943); 332 194, 196, 1575, 91 1995 (1947), think unadorned be, here) being interpretation. fact, not-regardless gave. decide. While scope seem principle lenity statutes mitigated Rule, less ambiguous statute). Reno Koray, 515 50, 64-65, 115 2021, ---------, 132 (1995) (explaining applies); Bass, 404 336, 347-348, 515, 522-523, 488 (1971) (discussing policies lenity). principle, unelaborated language: [t]o contrivance,'' construed 88 THE CHIEF JUSTICE joins, 89 Today majority upholds thereunder, majority's interpret "use[d] employ[ed], provide coherent dissent. 90 sustains anybody. because, prohibiting nonfraudulent identifies provides prophylaxis. With concur take determination Nondisclosure definitions laws. Unlike majority, accept suggest relation ultimately reject overly expansive integral example, "for purposes,'' ante, __, seeming particular language. __ securities'') (distinguishing buy lacking requisite connection). goes further, argues "depends "misappropriated trading'') incoherence construction, attempts describe theft not. correctly "qualifies use.'' Ante, observes "undisclosed embezzlement-the another.'' (citations internal omitted).1 So analogy taken, demonstrates 94 What do, explain how employ[d], distinguish funds becomes clear Turning supposedly requirement, asserts coincide.'' later apparent approval, contention 13). 13; explanation). Accepting description plain incomplete. touchstone "coincide'' with, consummated by, necessarily Where "apart [its] transaction''-even fact transaction-the My understanding proffered confirmed during [Court]: my client's stock? 101 102 Have laws? [Counsel]: you have. Why not? Isn't securit[ies] is? It's enables profits, pure simple. opportunity profit- 106 Same here. didn't get 107 difference anything want sense, point, finance number activities, 109 110 you're saying relevance, 111 Exactly. accounts racetrack, whatever. 113 That's exactly right, difference, [there] doubt "Other not, unique form profited tipping somebody else 16-19 (emphases above demonstrates, distinction met test), also, 6-7 (Government consummated'') (same). 116 requirement-and claim precludes financial embezzlement-also claims obtained, uniformly true, claiming imagine takes place via mechanism transaction-for broker directed instead stock-using funds-for account. unauthorized (and presumably undisclosed) "securities distinguishes monetary coincident never lacks "connection.'' Once accurately accepted-along implied language-that longer cover one, participant obvious learning plans, done things He newspaper publication, 36; itself, 37; kept solely amusement, fantasy game. deprived "exclusive use,'' and, "embezzlement'' property. according analogy, possibilities preclude actually significant embezzling embezzler property, hence "connection'' laws met.2 test tied trade. concedes latter am loss coherently former.3 defend forth Indeed, implicitly indefensibility acknowledging alternative exist dismissing explanations "overstatement.'' Having engages "imaginative'' constructing whole cloth. Thus, told, [s]ubstitute "ordinarily' "only''' describing degree connectedness winner. Presumably, similarly edit brief argue "ordinary,'' "inherent coherence, lack thereof, new suffers greater, dispositive, flaw: offered proposed otherwise. fundamental proposition "may supply reasoned given.'' 2867, credit "post hoc rationalizatio[n]'' agency, 2870, wonder possibly rely post rationalization invented consideration. 121 Whether merit, tell record us. "ordinary'' opined evaluate embodies statute.4 Moreover, surely behavior comply today, existed. upholding improved various policy considerations confidence, protecting reliance broad-sweeping misleading overarching illegal run afoul "purpose'' letter. approach glosses supposed threat comes nonpublic. 123 concedes, device' violation.'' authorize agents information-as perk bonus, perhaps-there violation.5 Yet case-disclosed use-the hypothesized "inhibiting participation,'' identical "Outsiders'' average hope diligence.6 124 "misappropriator focuses wrong Even hurts information.7 repeatedly E.g., 232-233, 1116-1117. Rather, forbidden. distinct removing aspect laudable, market. 125 implication, "use case. breadth arguing aim pick unforeseen, cunning, devices might cleverly markets.'' aptly queried, [t]hat's unusual, open-ended, isn't it?'' Unusual indeed. Putting aside dubious open-ended criminalizing "fraud,'' formal embodying Certainly embody theory-although deviates addition words person,'' repeats, unchanged, Given turns singularly uninformative.8 126 squarely setting version little litigating completely novel acknowledged, adopted, before, positions entitled persuasiveness warrants. Stevedore Co. Rambo, 1953, 1963, 1964, --- ---- (1997). wholly unpersuasive best, predictable contravenes better ad 127 conviction stand. provides, 129 conferred section, person''), 131 133 (3)- [Any issuer], [any instruments related securities], 134 acknowledges, range precedents. (rule ""without information''') 1991) banc), (1992)) 135 offers grounds defense "define'' differently concept defined valid "defining'' power. detect prove. justification, sustaining 137 "under fraudulent.''' §78n(e)). 138 hard-to-prove buyer "warehousing,'' whereby tips allies encourages 17.9 139 justifications acceptable cases. redefine misreads 140 "Simply put, enabling permits legal "fraudulent,' grant license term.'' 141 follows easily "Commission latitude 142 purports "are fraudulent,'' measured interpreting disclose. fraudulent.''10 143 justification non-fraudulent ones, standard. initial face, purport power, redefinition "constitute[s] §14(e).'' "conceived defended, alternatively, preventive,'' myriad were, given. 2866, 2870. [s]ensibly read'' "preventive'' 19; terms. 144 reasoning. constructions reasoning reflected regulation. 145 merits, fails. regulation, engaging §78n(e) legitimate objects prevention supra. bidder, seek current directly.11 146 Finally, direct fail elimination designed'' acts. score prove.''' 16). hypothetical difficulties tipper-tippee situation "classical'' suspect "misappropriation'' "knows know'' occurred came agent identified, simple task all, victim reluctant evidence perpetrator fraud.12 proving circumstances, 147 "designed'' seen remainder Quoting length Register, concern ""unfair disruption.''' (1980)). purpose-continuing paragraph partially majority-an so-called "stampede effect'' leaks rumors result 60413. (but on) "warehousing''-a intentionally announcement-if required. 17). concerns, approval "as protections.'' 148 reflects behavior: None above-described duties, Rules recognizes, information,''' ""arises parties.''' 1117). Unfair leaks, anyone, name "fraud'' Likewise 17), "warehousing'' tippees express circumstances. (noting concession bidder's theory). 149 enhancing overall goal, pursued limits deceit, manipulation. "not every unfairness activity.'' Because, sustained. 150 mail-fraud highly fact-bound, independently worthy plenary nonetheless accepted review endeavor 151 materially differ (1987). There, unanimous conviction, 28, 321-322, despite 319-320. wording finding instructions count dependent factual basis, legally insufficient fraud.13 syllabus prepared Reporter convenience reader. Detroit Timber Lumber 200 321, 282, 287, 499. conversation heading firm's allegedly shortly 26, 4. news reports 22, interested Pillsbury, earlier, report hotel chain auction acquisition. 73-74, 78-80). challenge sufficiency remains court, months' imprisonment, fined. 474 N.W.2d 613, 615, 623 (Minn.App.1991). Minnesota disbarred re 450 571 (Minn.1990). 566 (1992); Cherif, 933 403, 410 1991), 502 1071, 966, Clark, 915 439, 453 (C.A.9 1990). Twice 235-237, 1118-1119, (1980), instructions, question. whether, resting affirmed. Misappropriation Theory: Its Aftermath, Ohio St. L.J. 373, 375 (1988) (observing "Carpenter was, reckoning, unusual case,'' belonged preparing acquisition, Wall Street Journal). prosecuted "insider'' whose intimate association from, Met. sanction, reasoning, target. runs Chief Burger, 10b-5; envisioned it, ran 240, 1120-1121 absolute trading''); 243, 1122 propose adopt breadth. Where, entities persons-for client-but struggle invent plausibly telling. imaginative journal paid dollars millions publish 36-37. Counsel hypothesized, nontrading "misappropriat[ed] [his] deliver[ed] [Pillsbury], suggest[ed] [Pillsbury] desirable [O'Hagan] work.'' doubts stunningly displayed readiness betray "incoherent'' "inconsistent,'' failing inhibit "personal amusement game,'' textual to, principal-even reached Contrary suggestion, partial antidote alleviate proscription. disloyal imminent equitable relief agent's may, Dirks's reiteration above. 612, 618-619 additionally Insider Fraud Enforcement 1988 (ITSFEA), §2(1), 4677, following §78u-1. 32-35. ITSFEA declares are, Note includes §20A(a) providing "by information''; brought who, contemporaneously class.'' §78t-1(a). uphold ITSFEA's significance genre. §32 §78ff(a), chapter thereunder observance fined $1,000,000, years, ; imprisonment fines. disclosure: §13(d), §78m(d) (disclosure five percent classes securities); §13(e), §78m(e) (authorizing repurchases issuer); §14(d), §78n(d) owning class §14(f), §78n(f) directors constituting majority). adopts resembling Burger 6. draws attention measures: §240.15c2-1 (1970) (prohibiting broker-dealer's hypothecation customer's hypothecated commingled customer, written consent); §240.15c2-3 unvalidated German §240.15c2-4 accepting distributed promptly transmitted it); §240.15c2-5 (requiring commissions sales credit, participate arranging loans, purchasers). 22. leave day, bidders leak encourage announced.'' 17. proposing bar warehousing offers.'' 234, 1117-1118. acknowledges principal; decide limited. (Rule prohibits). exercising-that say "prevent'' fraud-and purported prevent. sees precision words: vulnerable recite preamble: hereby [fraudulent] Sensibly Logically practically, conceived preventive. opines anticipate "Once [purloined] identified,'' asserts, Post, assertion, assume told daughter son wealthy friend offing, child borrowing friend. tipper gratuitously tippee,'' misplaced. insists else, wonder, with''? Repeating ITSFEA, 44-45. relevance argument, reiterate §78ff(a) "willful[l] violat[ion]'' affirmative ruling, undisturbed portion finds sustainable. legislation targeting caught net. proceed practical consequences defendants large, L. 381, 60; "proportionally accused [might] Attorney, proportionally fewer SEC,'' 382. course, considerations. Of "use'' puts bring misappropriator: use'' embezzlement, chooses Logan State, 493 P.2d 842, 846 (Okla.Crim.App.1972) ("Any diversion benefit money''). thereafter real-world scenario tipped passing along unimpressed game, "inhibit'' recreational uses. example. theory; "inherently'' whatever assertion profitable speculative best. idea best generally. money, themselves, "sufficiently detached,'' non-"inherent'' detached'' event, "best-use'' unremarkable money,'' existing "rule'' nowhere confines indeed, contain word. "reason'' apply) equally "beyond reason'' conceding "just [Carpenter (1987)], defendant] gone Journal look, know, paying much. I'd bit buying going Heard column, that's fine, Journal''). dishonesty eliminated besides third-party whole. concerned, "honest'' third side dark. statement, "through'' unfortunately embrace error logic: Conflating causation correlation. deceive "simultaneously'' hurt causal sun tan nourishes plants melanin production humans causes grow. antecedent cause-namely, illegal, consequential divergent branch "gains through'' involved; effect existence advantage. greater leeway repeats verbatim entire hinges. obligated fits leaves possibility Suffice serve justify defining strong constitutional construing X', however "X' agency,'' "intelligible principle'' discretion jurisprudence, J.W. Hampton, Jr., 276 394, 409, 348, 352, (1928). Field 693-694, 495, 504-505, 294 (1892) executing law's operation depends). convert precisely described. plausible interpretation, usual unnecessary constitutionality doubt. company. apply. "could theory,'' 5, proviso himself valid. Facing testifies (falsely) tipper's moment tip, might, inclined tippee, 20, doubtful nonviolations concern, eliminating "know'' strange net'' reaching net, strangeness-and resulting allocation prosecutorial Attorneys-is perceives jurisdictional boundaries among Nation's prosecutors. believes shifting prosecutions, "practical large,'' ibid., undermines today's baffling willingness great lengths save itself.

Category: 7