argued april decided june held person trades securities personal profit using confidential information misappropriated breach fiduciary duty source information may held liable violating rule pp section proscribes using deceptive device connection purchase sale security contravention sec rules commission adopted rule pursuant rulemaking authority liability rule extend beyond conduct encompassed prohibition see ernst ernst hochfelder traditional classical theory insider trading liability violation rule occurs corporate insider trades corporation securities basis material confidential information obtained reason position trading qualifies deceptive device relationship trust confidence corporation shareholders insider gives rise duty disclose abstain trading chiarella complementary misappropriation theory urged government corporate outsider violates rule misappropriates confidential information securities trading purposes breach fiduciary duty owed source information rather persons trades pp misappropriation defined proper subject charge meets statutory requirement deceptive conduct connection securities transaction first misappropriators deal deception fiduciary pretends loyalty principal secretly converting principal information personal gain dupes defrauds principal company confidential information qualifies property company right exclusive use undisclosed misappropriation information constitutes fraud akin embezzlement cf carpenter deception nondisclosure central liability misappropriation theory theory thus consistent santa fe industries green decision underscoring purpose breach fiduciary duty ban trains conduct manipulative deceptive conversely full disclosure forecloses liability deception essential theory involves feigning fidelity information source fiduciary discloses source plans trade information deceptive device thus violation second requirement misappropriator deceptive use information connection purchase sale security satisfied themisappropriation theory fiduciary fraud consummated obtains confidential information without disclosure principal uses information purchasing selling securities transaction breach duty coincide even though person entity defrauded party trade instead source nonpublic information undisclosed trading basis misappropriated nonpublic information deceives source information harms members investing public misappropriation theory tuned animating purpose exchange act ensure honest markets thereby promoting investor confidence make scant sense hold lawyer turned trader like violator works law firm representing target tender offer works firm representing bidder statute text requires result pp eighth circuit erred holding misappropriation theory inconsistent first understood theory require neither misrepresentation nondisclosure explains however deceptive nondisclosure essential liability theory concretely failure disclose personal trading grand met dorsey breach duty made conduct deceptive second eighth circuit misread precedents ruled chiarella dirks sec central bank denver first interstate bank denver breach duty parties securities transaction market participants investors sufficient give rise liability chiarella supra expressly left open question misappropriation theory validity dirks supra also left room application misappropriation theory cases one central bank discussion concerned private civil litigation rule criminal liability pp vital decision criminal liability may sustained misappropriation theory exchange act requirement government prove person willfully violated rule order establish criminal violation act provision defendant may imprisoned violation proves knowledge rule requirement culpable intent weakens charge misappropriation theory indefinite permit imposition criminal liability see boyce motor lines eighth circuit may address remand challenges rule convictions pp relevant case sec exceed rulemaking authority adopting rule without requiring showing trading issue entailed breach fiduciary duty section prohibits fraudulent acts connection tender offer authorizes sec define prescribe means reasonably designed prevent acts adopted statutory authorization rule forbids person trade basis material nonpublic information concerns tender offer person knows know acquired insider offeror issuer someone working behalf unless within reasonable time purchase sale information source publicly disclosed rule imposes duty disclose abstain trading whether trader owes fiduciary duty respect confidentiality information invalidating rule eighth circuit reasoned inter alia empowers sec identify regulate fraudulent acts create definition fraud schreiber burlington northern interpretations guide construction chiarella supra failure disclose information fraudulent purposes duty speak arising fiduciary similar relationship trust confidence need resolve whether sec fraud defining authority broader like authority rule applied cases genre qualifies means reasonably designed prevent fraudulent trading material nonpublic information tender offer context prophylactic measure properly encompasses core activity prohibited sec may prohibit acts fraudulent common law prohibition reasonably designed prevent acts practices fraudulent see schreiber supra must accord sec assessment regard controlling weight unless arbitrary capricious manifestly contrary statute chevron natural resources defense council case sec assessment none fair assumption trading basis material nonpublic information often involve breach duty confidentiality bidder target company representatives sec cognizant proof problems enable sophisticated traders escape responsibility trading placed rule disclose abstain trading command require specific proof breach fiduciary duty insofar serves toprevent type misappropriation charged rule therefore proper exercise sec prophylactic power declines consider first instance alternate arguments rule prohibition trading conflicts violates due process eighth circuit may address remand argument preserved pp rulings securities fraud issues require reversal eighth circuit judgment mail fraud counts arguments attacking mail fraud convictions alternate grounds addressed eighth circuit remain open consideration remand pp reversed remanded ginsburg delivered opinion stevens kennedy souter breyer joined parts iii iv scalia joined scalia filed opinion concurring part dissenting part thomas filed opinion concurring judgment part dissenting part rehnquist joined notice opinion subject formal revision publication preliminary print reports readers requested notify reporter decisions wash ington typographical formal errors order corrections may made preliminary print goes press petitioner james herman writ certiorari appeals eighth circuit june justice ginsburg delivered opinion case concerns interpretation enforcement securities exchange act rules made securities exchange commission pursuant provisions rule rule two prime questions presented first relates misappropriation material nonpublic information securities trading second concerns fraudulent practices tender offer setting particular address resolve issues person trades securities personal profit using confidential information misappropriated breach fiduciary duty source information guilty violating rule commission exceed rulemaking authority adopting rule proscribes trading undisclosed information tender offer setting even absence duty disclose answer first question yes second question viewed context case respondent james herman partner law firm dorsey whitney minneapolis minnesota july grand metropolitan plc grand met company based london england retained dorsey whitney local counsel represent grand met regarding potential tender offer common stock pillsbury company headquartered minneapolis grand met dorsey whitney took precautions protect confidentiality grand met tender offer plans work grand met representation dorsey whitney withdrew representing grand met september less month later october grand met publicly announced tender offer pillsbury stock august dorsey whitney still representing grand met began purchasing call options pillsbury stock option gave right purchase shares pillsbury stock specified date september later august september made additional purchases pillsbury call options end september owned unexpired pillsbury options apparently individual investor see app also purchased september shares pillsbury common stock price per share grand met announced tender offer october price pillsbury stock rose nearly per share sold pillsbury call options common stock making profit million securities exchange commission sec commission initiated investigation transactions culminating count indictment indictment alleged defrauded law firm client grand met using trad ing purposes material nonpublic information regarding grand met planned tender offer accordingto indictment used profits gained trading conceal previous embezzlement conversion unrelated client trust funds charged counts mail fraud violation counts securities fraud violation securities exchange act exchange act stat sec rule cfr counts fraudulent trading connection tender offer violation exchange act sec rule cfr counts violating federal money laundering statutes see app jury convicted counts sentenced month term imprisonment divided panel appeals eighth circuit reversed convictions liability rule eighth circuit held may grounded theory securities fraud prosecution relied appeals also held rule prohibits trading possession material nonpublic information relating tender offer exceeds sec rulemaking authority rule contains breach fiduciary duty requirement eighth circuit concluded mail fraud money laundering convictions rested violations securities laws therefore stand securities fraud convictions reversed judge fagg dissenting stated recognize enforce misappropriation theory hold sec exceed rulemaking authority adopted rule without requiring proof breach fiduciary duty decisions courts appeals conflict propriety misappropriation theory rule see infra page legitimacy rule see infra granted certiorari reverse eighth circuit judgment address first appeals reversal convictions rule following fourth circuit lead see bryan eighth circuit rejected misappropriation theory basis liability hold accord several courts appeals criminal liability may predicated misappropriation theory pertinent part exchange act provides shall unlawful person directly indirectly use means instrumentality interstate commerce mails facility national securities use employ connection purchase sale security registered national securities exchange security registered manipulative deceptive device contrivance contravention rules regulations securities exchange commission may prescribe necessary appropriate public interest protection investors pursuant rulemaking authority commission adopted rule relevant provides shall unlawful person directly indirectly use means instrumentality interstate commerce mails facility national securities exchange employ device scheme artifice defraud engage act practice course business operates operate fraud deceit upon person liability rule precedent indicates extend beyond conduct encompassed prohibition see ernst ernst hochfelder scope rule exceed power congress granted commission see also central bank denver first interstate bank denver refused allow private challenges conduct prohibited text traditional classical theory insider trading liability rule violated corporate insider trades securities corporation basis material nonpublic information trading information qualifies deceptive device affirmed relationship trust confidence exists theshareholders corporation insiders obtained confidential information reason position corporation chiarella relationship recognized gives rise duty disclose abstain trading necessity preventing corporate insider tak ing unfair advantage uninformed stockholders citation omitted classical theory applies officers directors permanent insiders corporation also attorneys accountants consultants others temporarily become fiduciaries corporation see dirks sec misappropriation theory holds person commits fraud connection securities transaction thereby violates rule misappropriates confidential information securities trading purposes breach duty owed source information see brief theory fiduciary undisclosed self serving use principal information purchase sell securities breach duty loyalty confidentiality defrauds principal exclusive use information lieu premising liability fiduciary relationship company insider purchaser seller company stock misappropriation theory premises liability fiduciary turned trader deception entrusted access confidential information two theories complementary addressing efforts capitalize nonpublic information purchase sale securities classical theory targets corporate insider breach duty shareholders insider transacts misappropriation theory outlaws trading basis nonpublic information corporate outsider breach dutyowed trading party source information misappropriation theory thus designed protec integrity securities markets abuses outsiders corporation access confidential information affect th corporation security price revealed owe fiduciary duty corporation shareholders ibid case indictment alleged breach duty trust confidence owed law firm dorsey whitney client grand met traded basis nonpublic information regarding grand met planned tender offer pillsbury common stock app conduct government charged constituted fraudulent device connection purchase sale securities agree government misappropriation defined satisfies requirement chargeable conduct involve deceptive device contrivance used connection purchase sale securities observe first misappropriators government describes deal deception fiduciary pretends loyalty principal secretly converting principal information personal gain brief dupes defrauds principal see aldave misappropriation general theory liability trading nonpublic information hofstra rev addressed fraud species carpenter involved mail fraud statute proscription scheme artifice defraud affirming convictions statute said carpenter employee undertaking reveal employer confidential information became sham employee provided information co conspirators scheme obtain trading profits company confidential information recognized carpenter qualifies property company right exclusive use undisclosed misappropriation information violation fiduciary duty said carpenter constitutes fraud akin embezzlement fraudulent appropriation one use money goods entrusted one care another quoting grin shine see aldave hofstra carpenter discussion fraudulent misuse confidential information government notes particularly apt source guidance mail fraud statute like section long held require deception merely breach fiduciary duty brief citation omitted deception nondisclosure central theory liability government seeks recognition counsel government stated explanation theory oral argument satisfy common law rule trustee may use property entrusted consent satisfy requirement securities act deception wouldonly disclosure tr oral arg see generally restatement second agency agent disclosure obligation regarding use confidential information misappropriation theory advanced government consistent santa fe industries green decision underscoring purpose breach fiduciary duty ban rather trains conduct involving manipulation deception see contrast government allegations case santa fe industries pertinent facts disclosed persons charged violating rule see therefore deception nondisclosure liability provisions attach see similarly full disclosure forecloses liability misappropriation theory deception essential misappropriation theory involves feigning fidelity source information fiduciary discloses source plans trade nonpublic information deceptive device thus violation although fiduciary turned trader may remain liable state law breach duty loyalty turn next requirement misappropriator deceptive use information connection purchase sale security element satisfied fiduciary fraud consummated fiduciary gains confidential information without disclosure principal uses information purchase sell securities securities transaction breach duty thus coincide even though person entity defrauded party trade instead source nonpublic information see aldave hofstra fraud deceit practiced one person resultant harm another person group persons misappropriator trades basis material nonpublic information short gains advantageous market position deception deceives source information simultaneously harms members investing public see misappropriation theory targets information sort misappropriators ordinarily capitalize upon gain risk profits purchase sale securities misappropriator put information use statute prohibition implicated theory catch conceivable forms fraud involving confidential information rather catches fraudulent means capitalizing information securities transactions government notes another limitation forms fraud reaches misappropriation theory apply case person defrauded bank giving loan embezzledcash another used proceeds misdeed purchase securities brief case government proceeds value malefactor apart use securities transaction fraud complete soon money obtained ibid words money buy anything least many things misappropriation may thus viewed sufficiently detached subsequent securities transaction connection requirement met ibid dissent charge misappropriation theory incoherent information like funds put multiple uses see post misses point exchange act enacted part insure maintenance fair honest markets question fraudulent uses confidential information fall within prohibition fraud connection securities transaction hardly remarkable rule suitably applied fraudulent uses certain kinds information stretched beyond reason applied fraudulent use money dissent catch government overstatement observing money used manner purposes purchases government urges confidential information kind issue derives value utility securities trading see brief post several times emphasizing word substitute ordinarily government mark recognition government overstatement provoked dissent cry new theory see post case dissent relies motor vehicle mfrs assn state farm mut automobile ins shows extremity charge state farm reviewed agency rescission rule arbitrary capricious standard promulgation rule relevant statute judged see decision concluding agency adequately explained regulatory action see cautioned reviewing attempt make deficiencies contrast rule promulgation challenged consider government charge alleged fraudulent conduct falls within prohibitions rule context acknowledge simply defending government interpretation rule statute government lawyers pressed solid point far something lawyers occasionally even judges wont misappropriation theory comports language requires deception connection purchase sale security deception identifiable purchaser seller theory alsowell tuned animating purpose exchange act insure honest securities markets thereby promote investor confidence see fed reg trading misappropriated information undermines integrity investor confidence securities markets although informational disparity inevitable securities markets investors likely hesitate venture capital market trading based misappropriated nonpublic information unchecked law investor informational disadvantage vis vis misappropriator material nonpublic information stems contrivance luck disadvantage overcome research skill see brudney insiders outsiders informational advantages federal securities laws harv rev market thought systematically populated transactors trading basis misappropriated information investors refrain dealing altogether others incur costs avoid dealing transactors corruptly overcome unerodable informational advantages aldave hofstra sum considering inhibiting impact market participation trading misappropriated information congressional purposes underlying makes scant sense hold lawyer like violator works law firm representing target tender offer works law firm representing bidder text statute requires result misappropriation atissue properly made subject charge meets statutory requirement deceptive conduct connection securities transactions appeals rejected misappropriation theory primarily two grounds first eighth circuit comprehended theory requires neither misrepresentation nondisclosure see explained however see supra deceptive nondisclosure essential liability issue concretely case failure disclose personal trading grand met dorsey breach duty de conduct deceptive within meaning reply brief second obvious appeals said misappropriation theory moored requirement fraud connection purchase sale security see quoting according eighth circuit three decisions reveal liability predicated duty owed source nonpublic information chiarella dirks sec central bank denver first interstatebank denver nly breach duty parties securities transaction appeals concluded market participants investors sufficient give rise liability read statute precedent differently note refers purchase sale security identifiable purchasers sellers securities chiarella involved securities trades printer employed shop printed documents announcing corporate takeover bids see deducing names target companies documents handled printer bought shares targets takeover bids announced expecting correctly share prices rise upon announcement transactions printer disclose sellers securities target companies shareholders nonpublic information traded see ibid trading printer convicted violating rule reversed appeals judgment affirmed conviction see jury chiarella instructed convict defendant willfully failed inform sellers target company securities knew takeover bid increase value shares see emphasizing printer agency fiduciary relationship sellers held liability imposed broad theory see explained general duty participants market transactions forgo actions based material nonpublic information established doctrine said duty disclose abstain trading arises specific relationship two parties ibid hold chiarella relationship prompting liability trading undisclosed information relationship corporation insiders shareholders evident response government argument printer misappropriation information employer purposes securities trading violation duty confidentiality owed acquiring companies constituted fraud connection purchase sale security thereby satisfied terms declined reach potential basis printer liability theory submitted jury see four justices found merit see brennan concurring judgment burger dissenting blackmun joined marshall dissenting fifth justice stated wisely le ft resolution issue another day stevens concurring chiarella thus expressly left open misappropriation theory us today certain statements chiarella however led eighth circuit instant case conclude liability hinges exclusively breach duty owed purchaser seller securities see said chiarella liability premised upon duty disclose arising relationship trust confidence parties transaction emphasis added observed printshop employee defendant case person sellers placed trust confidence see statements rejected notion stretches far impose general duty participants market transactions forgo actions based material nonpublic information confine context statements highlighted eighth circuit short appear opinion carefully leaving future resolution validity misappropriation theory therefore read foreclose theory dirks left room application misappropriation theory cases like one confront dirks involved investment analyst received information former insider corporation analyst connection see information indicated corporation engaged massive fraud analyst investigated fraud obtaining corroborating information employees corporation investigation analyst discussed findings clients investors sold holdings company analyst suspected gross wrongdoing see sec censured analyst inter alia aiding abetting rule violations clients investors sold holdings based nonpublic information analyst passed see sec view analyst tippee corporation insiders duty rule refrain communicating nonpublic information persons likely trade basis see found obligation see repeated key point made chiarella general duty participants market transactions forgo actions based material nonpublic information quoting chiarella see aldave hofstra misappropriation theory bars trading basis informationthat wrongdoer converted use violation fiduciary contractual similar obligation owner rightful possessor information showing made dirks tippers violated duty disclosing analyst nonpublic information former employer insiders acted personal profit expose massive fraud within corporation see dirks absent violation tippers derivative liability tippee see important purposes instant case observed dirks expectation analyst sources keep information confidence analyst misappropriate illegally obtain information dirks thus presents suggestion person gains nonpublic information misappropriation breach fiduciary duty escapes liability without alerting source trades information last three cases eighth circuit regarded warranting disapproval misappropriation theory central bank held private plaintiff may maintain aiding abetting suit immediately cautioned central bank secondary actors securities markets may sometimes chargeable securities acts person entity including lawyer accountant bank employs manipulative device makes material misstatement omission purchaser seller securities relies may liable primary violator assuming requirements primary liability rule met ibid emphasis added eighth circuit isolated statement quoted drew conclusion covers deceptive statements omissions purchasers sellers perhaps market participants rely see evident question presented central bank however quoted passage sought clarify secondary actors although subject aiding abetting liability remain subject primary liability rule certain conduct furthermore central bank discussion concerned private civil litigation rule criminal liability central bank reference purchasers sellers securities must read light longstanding limitation private suits blue chip stamps manor drug stores held actual purchasers sellers securities may maintain private civil action rule confined private right action policy considerations particular blue chip stamps recognized abuse potential proof problems inherent suits investors neither bought sold asserted traded absent fraudulent conduct others see see also holmes securities investor protection corporation concurring part concurring judgment scalia concurring judgment criminal prosecutions present dangers addressed blue chip stamps decision inapplicable indictments violations rule naftalin see also holmes concurring part concurring judgment standing requirement private civil actions rule import criminal prosecutions willful violations sum misappropriation theory haveexamined explained opinion consistent statute precedent vital decision criminal liability may sustained misappropriation theory emphasize two sturdy safeguards congress provided regarding scienter establish criminal violation rule government must prove person willfully violated provision see furthermore defendant may imprisoned violating rule proves hehad knowledge rule see ibid charge misappropriation theory indefinite permit imposition criminal liability see brief respondent thus fails theory limited breach recognized duty addition statute requirement presence culpable intent necessary element offense much destroy force argument application statute circumstances unjust boyce motor lines eighth circuit erred holding misappropriation theory inconsistent appeals may address remand challenges convictions rule consider next ground appeals reversed convictions fraudulent trading connection tender offer violation exchange act sec rule sole question us convictions commission appeals held exceed rulemaking authority adopted rule without requiring showing trading issue entailed breach fiduciary duty hold commission regard extent relevant case exceed authority governing statutory provision exchange act reads relevant part shall unlawful person engage fraudulent deceptive manipulative acts practices connection tender offer sec shall purposes subsection rules regulations define prescribe means reasonably designed prevent acts practices fraudulent deceptive manipulative provisions disclosure williams act congress sought ensure shareholders confronted cash tender offer stock required respond without adequate information rondeau mosinee paper see lewis mcgraw per curiam purpose williams act informed decisionmaking shareholders recognized schreiber burlington northern congress designed williams act make disclosure rather imposed principles fairness artificiality preferred method market regulation section explained supplements precise disclosure provisions found elsewhere williams act requiring disclosure explicitly addressed tender offer context required relying rulemaking authorization commission promulgated rule measure provides person taken substantial step steps commence commenced tender offer offering person shall constitute fraudulent deceptive manipulative act practice within meaning section exchange act person possession material information relating tender offer information knows reason know nonpublic knows reason know acquired directly indirectly offering person issuer securities sought sought tender offer officer director partner employee person acting behalf offering person issuer purchase sell cause purchased sold securities securities convertible exchangeable securities option right obtain dispose foregoing securities unless within reasonable time prior purchase sale information source publicly disclosed press release otherwise cfr one violates rule trades basis material nonpublic information concerning pending tender offer knows reason know acquired directly indirectly insider offeror issuer someone working behalf rule disclosure provision creates duty traders fall within ambit abstain disclose without regard whether trader owes fiduciary duty respect confidentiality information chestman en banc emphasis added cert denied eighth circuit view rule applies whether trading question breaches fiduciary duty regulation exceeds sec rulemaking authority see contra maio peters chestman holding rule proper exercise sec statutory authority support holding eighth circuit relied text decisions schreiber chiarella see eighth circuit homed essence rulemaking authorization statute empowers sec define prescribe means reasonably designed prevent acts practices fraudulent means eighth circuit found plain sec may identify regulate tender offer context acts practices law already defines fraudulent eighth circuit maintained sec may create definition fraud ibid internal quotation marks omitted eighth circuit pointed held schreiber word manipulative phrase fraudulent deceptive manipulative acts practices means word means absent misrepresentation nondisclosure act indicted manipulative see citing schreiber section interpretations guide construction eighth circuit added see citing acknowledgment schreiber broad antifraud prohibition modeled antifraud provisions rule citation omitted see meaning fraudulent eighth circuit looked chiarella see case eighth circuit recounted held failure disclose information fraudulent duty speak arising fiduciary similar relationship trust confidence chiarella quoting restatement second torts demands showing breach fiduciary duty breach necessary make violation eighth circuitconcluded commission authority prescribe means reasonably designed prevent fraudulent acts eighth circuit stated properly read provision means simply sec broad regulatory powers field tender offers statutory terms fixed meaning sec alter way administrative rule urges eighth circuit reading misapprehends commission authority define fraudulent acts commission power prevent defining power submits virtual nullity sec permitted go beyond common law fraud separately prohibited first self operative sentence section brief see maintaining commission power define fraudulent acts broader rulemaking power questions appeals reading schreiber see parenthetically notes word schreiber manipulative unlike fraudulent observes manipulative virtually term art used connection securities markets quoting schreiber tellingly submits schreiber involved acts alleged violate self operative provision first sentence sentence containing language similar second sentence containing rulemaking authorization points track simply authorizes sec proscribe manipulative deceptive device contrivance brief instead rulemaking prescription tracks exchange act concernsthe conduct broker dealers counter markets see brief since see stat given commission authority define prescribe means reasonably designed prevent broker dealer acts practices fraudulent deceptive manipulative congress added rulemaking language government commission already used authority reach beyond common law fraud see brief need resolve case whether commission authority define acts practices fraudulent broader commission fraud defining authority agree rule applied cases genre qualifies means reasonably designed prevent fraudulent trading material nonpublic information tender offer context prophylactic measure itsmission prevent typically encompasses core activity prohibited noted schreiber rulemaking authorization gives commission latitude even context term art like manipulative regulate nondeceptive activities reasonably designed means preventing manipulative acts without suggesting change meaning term manipulative hold accordingly commission may prohibit acts fraudulent common law prohibition reasonably designed prevent acts practices fraudulent congress authorized commission prescribe legislative rules owe commission judgment mere deference weight batterton francis therefore determining whether rule disclose abstain trading requirement reasonably designed prevent fraudulent acts must accord commission assessment controlling weight unless arbitrary capricious manifestly contrary statute chevron natural resources defense council case conclude none adopting disclose abstain rule sec explained commission previously expressed continues serious concerns trading persons possession material nonpublic information relating tender offer practice results unfair disparities market information market disruption security holders purchase sell persons effectively denied benefits disclosure substantive protections williams act furnished information security holders able make informed investment decision involve deferring purchase sale securities material information disseminated tender offer commenced terminated fed reg footnotes omitted emphasizes rule reaches trading breach duty likely difficult prove reply brief particularly context tender offer tenth circuit recognized fairly wide circle people confidential information peters notably attorneys investment bankers accountants involved structuring transaction availability information may lead abuse even hint upcoming tender offer may send price target company stock soaring sec materia individuals entrusted nonpublic information particularly long term loyalty issuer may find temptation trade information hard resist view large short term profits potentially available peters may possible prove circumstantially person traded basis material nonpublic information almost impossible prove trader obtained information breach fiduciary duty owed either trader ultimate insider source information ibid example tippee trades information received insider illustrates problem rule tippee assumes fiduciary duty shareholders corporation trade material nonpublic information insider breached fiduciary duty shareholders disclosing information tippee tippee knows know breach dirks show tippee traded nonpublic information tender offer breached fiduciary duty require proof insider source breached fiduciary duty tippee knew known breach yet cases parties information transfer insider alleged tippee peters alternate ground affirming eighth circuit judgment urges rule invalid prohibits trading advance tender offer substantial step commence offer taken prohibits fraudulent acts connection tender offer see brief respondent contends covering conduct rule fails comport due process two levels rule give fair notice advance tender offer violation occurs disposes scienter requirement appeals address arguments raise due process points briefs decline consider contentions first instance appeals may address remand arguments preserved based dispositions securities fraud convictions appeals also reversed convictions mail fraud see reversal securitiesconvictions appeals recognized id matter law require mail fraud convictions likewise reversed citing carpenter unanimously affirmed mail wire fraud convictions based conduct evenly divided defendants securities fraud convictions case appeals said indictment structured mail fraud charges disassociated securities fraud charges absent securities fraud fraud upon base mail fraud charges urges appeals position irreconcilable carpenter carpenter mail fraud charges independent securities fraud charges even though rest set facts brief need linger matter rulings securities fraud issues require reverse appeals judgment mail fraud counts well note attacked mail fraud convictions appeals alternate grounds arguments yet addressed eighth circuit remain open consideration remand judgment appeals eighth circuit reversed case remanded proceedings consistent opinion ordered petitioner james herman writ certiorari appeals eighth circuit june justice scalia concurring part dissenting part join parts iii iv opinion agree however part ii opinion containing analysis respondent convictions rule entirely agree justice thomas analysis convictions either principally seems irrelevant whether government theory respondent acts covered coherent consistent post true respect matters agency accorded adjudicative authority policymaking discretion agency action must supported reasons agency sets forth sec chenery see also sec chenery think agency unadorned application law need least chevron deference given agency interpretation point fact respondent actions either violated rule regardless reasons government gave us decide explanation scope rule entirely reasonable someother context seem accord principle lenity apply criminal statutes mitigated rule less ambiguous statute see reno koray explaining circumstances rule lenity applies bass discussing policies underlying rule lenity light principle seems unelaborated statutory language use employ connection purchase sale security manipulative deceptive device contrivance must construed require manipulation deception party securities transaction petitioner james herman writ certiorari appeals eighth circuit june justice thomas chief justice joins concurring judgment part dissenting part today majority upholds respondent convictions violating securities exchange act rule promulgated thereunder based upon securities exchange commission misappropriation theory central majority holding need interpret requirement deceptive device use employ ed connection purchase sale security commission misappropriation theory fails provide coherent consistent interpretation essential requirement liability dissent majority also sustains respondent convictions securities exchange act rule promulgated thereunder regardless whether respondent violated fiduciary duty anybody dissent holding allow regulations prohibiting nonfraudulent acts prophylactic certain fraudulent acts neither majority commission identifies relevant underlying fraud rule reasonably provides prophylaxis regard fraud convictions however concur judgment take issue majority determination undisclosed misappropriation confidential information fiduciary constitute deceptive device within meaning nondisclosure duty disclose satisfies definitions fraud deceit purposes securities laws see chiarella unlike majority however accept commission interpretation deceptive device use connection securities transaction although commission majority points seem suggest relation securities transaction satisfies connection requirement ultimately reject overly expansive construction require integral connection fraud securities transaction majority example misappropriation theory applies undisclosed misappropriation confidential information securities trading purposes ante thus seeming require particular intent misappropriator order satisfy connection language see also ante misappropriation theory targets information sort misappropriators ordinarily capitalize upon gain risk profits purchase sale securities emphasis added ante distinguishing embezzlement money used buy securities lacking requisite connection commission goes argues misappropriation theory satisfies connection requirement depends inherent connection deceptive conduct purchase sale security brief unitedstates emphasis added see also ibid misappropriated information personal value respondent utility securities trading emphasis added commission construction relevant language incoherence construction become evident majority attempts describe fraudulent theft information falls commission misappropriation theory fraudulent theft money majority correctly notes confidential information qualifies property company right exclusive use ante observes undisclosed misappropriation information violation fiduciary duty constitutes fraud akin embezzlement fraudulent appropriation one use money goods entrusted one care another ibid citations internal quotation marks omitted far majority analogy embezzlement well taken adequately demonstrates undisclosed misappropriation fraud source information embezzlement analogy however explain relevant fraud use employ connection securities transaction majority seeks distinguish embezzlement funds embezzlement information becomes clear neither commission majority hasa coherent theory regarding connection requirement turning first embezzlement information supposedly meets connection requirement majority asserts requirement satisfied fiduciary fraud consummated fiduciary gains confidential information without disclosure principal uses information purchase sell securities securities transaction breach duty thus coincide ante accepting government description scope theory becomes plain majority explanation misappropriation theory supposedly satisfies connection requirement incomplete touchstone required embezzlement use employ ed connection securities transaction merely coincide consummated transaction necessarily consummated transaction property embezzled value apart use securities transaction even though fact used securities transaction government contends violation misappropriation theory understanding government proffered theory liability construction connection requirement confirmed government explanation oral argument appropriate client money order buy stock violated securities laws counsel think connection purchase securit ies much one counsel much one case use information enables profits pure simple opportunity engage profit money way buy stock get money counsel difference money anything want sense fraud complete point go use money finance number activities connection far less close case value information personal profit respondent take profit securities markets trading saying case misappropriation relevance substantial relevance reference purchase securities counsel exactly take money accounts go racetrack whatever counsel exactly right difference doubt kind misappropriation property connection purchase sale securities kinds misappropriation property may may unique form fraud unique securities markets fact way respondent profited information either trading tipping somebody else enable trades tr oral arg emphases added government construction connection requirement claim requirement precludes coverage financial embezzlement also demonstrates majority described distinction financial embezzlement incomplete although majority claims fraud financial embezzlement case complete soon money obtained securities transaction consummated uniformly true thus government basis claiming embezzlement violate securities laws difficult imagine embezzlement money takes place via mechanism securities transaction example broker directed purchase stock clientand instead purchases stock using client funds account unauthorized presumably undisclosed transaction act constitutes embezzlement securities transaction breach duty thus coincide presumably distinguishes monetary embezzlement government thus necessarily coincident securities transaction never lacks connection government construction misappropriation theory accurately described accepted along implied construction connection language theory longer cover cases one involving fraud source information source connection participant securities transaction seems obvious undisclosed misappropriation confidential information necessarily consummated securities transaction case example upon learning grand met confidential takeover plans done number things information sold newspaper publication see tr oral arg given sold information pillsbury see even kept information used solely personal amusement perhaps fantasy stock trading game activities deprived grand met right exclusive use ante information undisclosed constitute embezzlement grand met informational property theory liability however activities violate according commission monetary embezzlement analogy possibilities sufficient preclude violation misappropriation theory even informational property wasused securities trading actually use information purchase securities thus significant case embezzling money used purchase securities cases embezzler done something else property hence commission necessary connection securities laws met relevant test connection language whether fraudulent act necessarily tied securities transaction misappropriation confidential information used trade violates misappropriation funds used trade commission concedes latter covered theory loss see theory coherently applied former majority makes attempt defend misappropriation theory set forth commission indeed majority implicitly concedes indefensibility commission theory acknowledging alternative uses misappropriated information exist violate securities laws dismissing government repeated explanations misappropriation theory mere overstatement ante rejected government description theory majority engages imaginative exercise constructing misappropriation theory whole cloth thus told merely ubstitute ordinarily describing degree connectedness misappropriation securities transaction government winner ibid presumably majority similarly edit government brief argue ordinary rather inherent connection deceptive conduct purchase sale security brief emphasis added need address coherence lack thereof majority new theory suffers far greater dispositive flaw theory offered commission indeed far know majority opinion new theory never proposed commission much less adopted rule otherwise fundamental proposition law may supply reasoned basis agency action agency given motor vehicle mfrs assn state farm mut automobile ins even credit post hoc rationalizatio counsel agency one left wonder possibly rely post hoc rationalization invented never even presented commission consideration whether majority new theory merit wecannot possibly tell record us findings regarding ordinary use misappropriated information much less regarding ordinary use forms embezzled property commission opined scope new requirement property must ordinarily used securities trading order misappropriation connection securities transaction simply know covered requirement hence evaluate whether requirement embodies consistent coherent interpretation statute moreover persons subject new theory respondent surely andcannot regulate behavior comply new theory today theory never existed short majority new theory simply presented case form basis upholding respondent convictions upholding respondent convictions new improved misappropriation theory majority also points various policy considerations underlying securities laws maintaining fair honest markets promoting investor confidence protecting integrity securities markets ante repeated reliance broad sweeping legislative purposes reaches far misleading context misappropriation theory reaches far regardless overarching purpose securities laws illegal run afoul purpose statute letter majority approach misleading case glosses fact supposed threat fair honest markets investor confidence market integrity comes supposed fraud case mere fact information used nonpublic majority concedes deception essential misappropriation theory involves feigning fidelity source information fiduciary discloses source plans trade nonpublic information deceptive device thus violation ante emphasis added indeed source expressly authorize agents trade confidential information perk bonus perhaps likewise violation yet either case disclosed misuse orauthorized use hypothesized inhibiting impact market participation ante identical behavior violating misappropriation theory outsiders still trading based nonpublic information average investor hope obtaining diligence majority statement misappropriator trades basis material nonpublic information short gains advantageous market position deception deceives source information simultaneously harms members investing public ante emphasis added thus focuses wrong point even true trading nonpublic information hurts public true whether deception source information moreover repeatedly held use nonpublic information trade violation chiarella rather use fraud connection securities transaction forbidden relevant element fraud impact integrity subsequent transactions distinct nonfraudulent element using nonpublic information one reasonably question whether fraud used connection securities transaction one likewise question whether removing aspect fraud though perhaps laudable anything confidence integrity market absence coherent consistent misappropriation theory necessary implication coherent consistent application statutory use employ connection language particularly problematic context case government claims remarkable breadth delegation authority arguing aim section pick unforeseen cunning deceptive devices people might cleverly use securities markets tr oral arg aptly queried hat rather unusual criminal statute open ended ibid unusual indeed putting aside dubious validity open ended delegation independent agency go forth create regulations criminalizing fraud case wedo even formal regulation embodying agency misappropriation theory certainly rule said embody theory although deviates statutory language addition words person merely repeats unchanged connection language given validity misappropriation theory turns construction language regulatory language singularly uninformative regulation squarely setting forth version misappropriation theory commission interpretation statutory language left little commission litigating position majority completely novel theory even acknowledged much less adopted commission noted positions entitled deference get weight persuasiveness warrants metropolitan stevedore rambo slip yet find wholly unpersuasive litigating position commission best embodies inconsistent incoherent interpretation relevant statutory language provide predictable guidance behavior contravenes statute position better ad hoc interpretation statutory language view provide basis liability also view conviction violating rule stand section exchange act provides relevant part shall unlawful person engage fraudulent deceptive manipulative acts practices connection tender offer commission shall purposes subsection rules regulations define prescribe means reasonably designed prevent acts practices fraudulent deceptive manipulative person taken substantial step steps commence commenced tender offer offering person shall constitute fraudulent deceptive manipulative act practice within meaning securities exchange act person possession material information relating tender offer information knows reason know nonpublic knows reason know acquired directly indirectly offering person issuer securities sought sought tender offer person acting behalf offering person issuer purchase sell securities various instruments related securities unless within reasonable time prior purchase sale information source publicly disclosed press release otherwise cfr commission offers two grounds defense rule first argues delegates commission authority define fraud differently concept defined rule valid exercise defining power second argues authorizes commission prescribe means reasonably designed prevent fraudulent acts rule prophylactic rule may prohibit nonfraudulent acts means preventing fraudulent acts difficult detect prove majority declines reach commission first justification instead sustaining rule ground commission may prohibit acts fraudulent common law prohibition reasonably designed prevent acts practices fraudulent ante quoting find neither commission justifications rule acceptable misappropriation cases regard commission claim authority redefine concept fraud agree eighth circuit commission misreads relevant provision simply put enabling provision permits sec identify regulate acts practices fall within legal definition fraudulent grant sec license redefine term insofar rule purports define acts practices fraudulent must measured precedents interpreting scope fraud majority concedes however rule prohibit merely trading connection fraudulent nondisclosure rather prohibits trading connection nondisclosure regardless presence duty disclose ante rule thus exceeds scope commission authority define acts practices fraudulent turning commission second justification rule although agree majority authorizes commission prohibit non fraudulent acts means reasonably designed prevent fraudulent ones agree rule satisfies standard initial matter rule face purport exercise commission prophylactic power rather redefinition constitute fraudulent deceptive manipulative act practice within meaning rule conceived defended alternatively definitional preventive ante misses point evaluate regulations based myriad explanations given relevant agency explanations justifications fact given see state farm rule may ensibly read exercise preventive authority ante itcan differently read contrary terms already concluded commission lacks power redefine fraud regulation sustained reasoning seem complete answer whether rule valid might give deference commission regulatory constructions reasoning used regulation instance contrary law need give deference commission post hoc litigating justifications reflected regulation even merits commission prophylactic justification fails order valid prophylactic regulation rule must reasonably designed merely prevent fraud prevent persons engaging fraudulent deceptive manipulative acts practices connection tender offer emphasis added insofar rule designed prevent type misappropriation issue case acts legitimate objects prevention commission misappropriation theory represent coherent interpretation statutory connection requirement explained part supra even assuming person misappropriating information bidder commits fraud bidder commission provided coherent consistent explanation fraud connection tender offer thus commission may seek prevent indirectly conduct current theory prohibit directly finally even assuming commission misappropriation theory valid basis direct liability fail see rule elimination requirement breach fiduciary duty reasonably designed prevent underlying fraudulent acts majority primary argument score many cases breach duty likely difficult prove ante quoting reply brief although majority hypothetical difficulties involved tipper tippee situation might merit context classical insider trading reason suspect similar difficulties misappropriation cases cases rule requires commission prove defendant knows reason know nonpublic information upon trading occurred came bidder agent bidder source information identified simple task obtain proof breach duty bidder defrauded misappropriation cases reason suspect victim fraud reluctant provide evidence perpetrator fraud particular difficulties proving breach duty circumstances rule removing requirement breach said reasonably designed prevent underlying violations misappropriation theory rule fact designed seen remainder majority discussion rule quoting length commission explanation rule federal register majority notes commission concern unfair disparities market information market disruption ante quoting fed reg commission explanation rule purpose continuing paragraph partially quoted majority example problem addressed called stampede effect based leaks rumors may result trading material nonpublic information fed reg majority also notes rely government contention able prohibit supposedly problematic practice warehousing bidder intentionally tipping allies buy stock advance bid announcement breach offiduciary duty required ante citing reply brief given policy concerns majority notes seeming approval commission justification rule means necessary proper assure efficacy williams act protections ante although reasoning doubt accurately reflects commission purposes adopting rule little support validity rule means designed prevent behavior none described acts involve breaches fiduciary duties hence rule designed prevent satisfy requirement commission rules promulgated section reasonably designed prevent acts practices fraudulent deceptive manipulative majority recognizes general duty participants market transactions forgo actions based material nonpublic information duty arises specific relationship two parties ante quoting chiarella unfair disparities market information potential stampede effect leaks necessarily involve breach duty anyone thus proper objects regulation name fraud likewise government concedes reply brief warehousing fraudulent given tippees using information express knowledge approval source information simply deception violation duty disclose circumstances cf ante noting government concession use bidder information bidder knowledge fraudulent misappropriation theory enhancing overall efficacy williams act may reasonable goal one may bepursued limits grant rulemaking authority prevention fraud deceit manipulation held context every instance financial unfairness constitutes fraudulent activity chiarella context misappropriation cases rule means reasonably designed prevent persons engaging fraud connection tender offer exceeds commission authority respondent conviction violation rule sustained regard respondent convictions mail fraud counts view may sustained regardless whether respondent may convicted securities fraud counts although issue highly fact bound independently worthy plenary consideration nonetheless accepted issue review therefore endeavor resolve read indictment materially differ indictment carpenter unanimous upholding mail fraud conviction despite evenly divided securities fraud counts think wording indictment current case requires finding securities fraud order find mail fraud certainly jury instructions make mail fraud count dependent securities fraud counts rather counts simply predicated factual basis facts legally insufficient constitute securities fraud make legally insufficient constitute mail fraud therefore concur judgment ofthe relates respondent mail fraud convictions footnotes evidence traded basis nonpublicinformation misappropriated law firm government relied conversation dorsey whitney partner heading firm grand met representation conversation allegedly took place shortly august see brief urges government evidence show traded basis nonpublic information points news reports august grand met interested acquiring pillsbury earlier august news report grand met put hotel chain auction raise funds acquisition see brief respondent citing app challenge sufficiency evidence remains open consideration remand convicted theft state sentenced months imprisonment fined see state app minnesota disbarred practice law see see chestman en banc cert denied sec cherif cert denied sec clark twice presented question whether criminal liability violation may based misappropriation theory chiarella jury received misappropriation theory instructions declined address question see infra carpenter divided evenly whether circumstances case convictions resting misappropriation theory affirmed see aldave misappropriation theory carpenter aftermath ohio observing carpenter reckoning unusual case information misappropriated belonged company preparing engage securities transactions bidder corporate acquisition wall street journal government prosecuted classical theory insider pillsbury corporation whose stock traded although outsider respect pillsbury intimate association found traded confidential information dorsey whitney counsel tender offeror grand met misappropriation theory securities trading escape exchange act sanction dissent reasoning simply associated gained nonpublic information bidder rather target misappropriation theory urged case disclosure obligation runs source information dorsey whitney grand met chief justice burger dissenting chiarella advanced broader reading rule disclosure obligation envisioned ran misappropriator trades person misappropriated nonpublic information absolute duty disclose information refrain trading see also government propose adopt misappropriation theory breadth however person trading basis material nonpublic information owes duty loyalty confidentiality two entities persons example law firm client butmakes disclosure one trader may still liable misappropriation theory dissent evident struggle invent uses plausibly might put nonpublic information see post telling imaginative suggest trade journal paid dollars millions publish information see tr oral arg counsel nontrading use misappropriat ed information law firm client deliver ed pillsbury suggest ed pillsbury future might find desirable use legal work pillsbury might well large doubts engaging legal work lawyer stunningly displayed readiness betray client confidence commission theory incoherent inconsistent post failing inhibit use confidential information personal amusement fantasy stock trading game post noted earlier however see supra textual requirement deception precludes liability person trading basis nonpublic information disclosed trading plans obtained authorization principal even though conduct may affect securities markets samemanner conduct reached misappropriation theory contrary dissent suggestion see post fact partial antidote problems designed alleviate call question prohibition conduct falls within textual proscription moreover disloyal agent discloses imminent breach duty principal may seek appropriate equitable relief state law furthermore context tender offer principal authorizes agent trading confidential information may commission view incur liability exchange act violation rule eighth circuit conclusion contrary based large part dirks reiteration chiarella language quoted discussed see additionally argues congress confirmed validity misappropriation theory insider trading securities fraud enforcement act itsfea stat note following see brief itsfea declares rules regulations securities exchange commission securities exchange act governing trading possession material nonpublic information required act necessary appropriate public interest protection investors note following itsfea also includes new exchange act expressly providing private cause action persons violate exchange act purchasing selling security possession material nonpublic information action may brought person contemporaneously purchase sale securities subject violation purchased sold securities class uphold misappropriation theory basis address itsfea significance cases genre relevant part exchange act set forth provides person willfully violates provision chapter rule regulation thereunder violation made unlawful observance required terms chapter shall upon conviction fined imprisoned years person shall subject imprisonment section violation rule regulation proves knowledge rule regulation statute provides defense imposition monetary fines see ibid addition williams act amendments added exchange act following provisions concerning disclosure disclosure requirements persons acquiring five percent certain classes securities authorizing commission adopt disclosure requirements certain repurchases securities issuer disclosure requirements tender offer results offeror owning five percent class securities disclosure requirements tender offer results new corporate directors constituting majority rule thus adopts tender offer context requirement resembling one chief justice burger adopted chiarella misappropriators see supra government draws attention following measures cfr prohibiting broker dealer hypothecation customer securities hypothecated securities commingled securities another customer absent written consent prohibiting transactions broker dealers unvalidated german securities prohibiting broker dealers accepting part sale price security distributed unless money received promptly transmitted persons entitled requiring broker dealers provide written disclosure credit terms commissions connection securities sales broker dealers extend credit participate arranging loans purchasers see brief leave another day issue requires decision legitimacy rule applied warehousing government describes practice bidders leak advance information tender offer allies encourage purchase target company stock bid announced reply brief observed chiarella one commission purposes proposing rule bar warehousing authority regulate tender offers government acknowledges trading authorized principal breaches fiduciary duty see reply brief instant case however involve trading authorized principal therefore need decide whether commission proscription warehousing falls within authority define prevent fraud commission power limited see supra rule may proscribe conduct prohibits dissent urges commission must precise authority exercising must say whether acting define prevent fraud instance purported define prevent see post dissent sees precision rule words shall constitute fraudulent act within meaning section find commission rule vulnerable failure recite regulatory preamble hereby exercise authority define prescribe means reasonably designed prevent fraudulent acts sensibly read rule exercise commission full authority logically practically rule may conceived defended alternatively definitional preventive dissent opines reason anticipate difficulties proving breach duty misappropriation cases source purloined information identified dissent asserts simple task obtain proof breach duty post test assertion assume misappropriating partner dorsey whitney told daughter son wealthy friend tender pillsbury offing tippee promptly purchased pillsbury stock child borrowing purchase price wealthy friend dissent confidence post reason suspect tipper gratuitously protect tippee seems misplaced dissent insists even misappropriation information bidder tender offer fraud commission explained fraud connection tender offer post else one wonder might fraud connection repeating argument made concerning misappropriation theory see supra urges congress confirmed rule validity itsfea see brief uphold rule basis need address itsfea relevance case scienter argument reiterate requires government prove willful violat ion securities laws lack knowledge relevant rule affirmative defense sentence imprisonment see supra appeals reversed respondent money laundering convictions similar reasoning see seek review ruling leave undisturbed portion appeals judgment dissent finds convictions mail fraud counts securities fraud counts sustainable post dissent view securities traders like escape sec civil actions federal prosecutions legislation targeting securities fraud caught trading activities broad mail fraud net misappropriation theory cases proceed federal mail wire fraud statutes practical consequences individual defendants might large see aldave ohio however proportionally persons accused insider trading might pursued attorney proportionally fewer sec decision course rest suchenforcement policy considerations course use one puts misappropriated property need one designed bring profit misappropriator fraudulent appropriation one use constitutes embezzlement regardless embezzler chooses money see logan state crim app diversion funds held trust constitutes embezzlement whether direct personal benefit long owner deprived money indeed even someone else thereafter used information trade misappropriation complete trade liability obvious real world example scenario simply tipped someone else information mere act passing information along violated fiduciary duty undisclosed embezzlement confidential information regardless whether tippee later traded information majority apparently unimpressed example misappropriator using embezzled information personal amusement fantasy stock trading game finding need commission inhibit recreational uses ante argument course misses point example use violate securities laws yet covered commission theory rather example shows misappropriation information inherently tied securities trading hence misappropriation information whatever ultimate use fails commission test connection requirement rule similarly majority assertion alternative uses misappropriated information profitable use securities trading ante speculative best idea best profitable use misappropriated information either case generally likewise idea best use forms misappropriated property least conceivable best use embezzled money securities securities trading use embezzled money purchase securities sufficiently detached ante securities transaction see reason non inherent use information securities trading also sufficiently detached government theory event loss find statutory language hint best use requirement setting requisite connection deception purchase sale securities majority claim unremarkable rule suitably applied fraudulent uses certain kinds information stretched beyond reason applied fraudulent use money ante remarkable given existing rule rule nowhere confines information indeed even contain word given reason offered government support misappropriation theory applies fails apply equally money information application government theory case less beyond reason applied financial embezzlement see tr oral arg government conceding carpenter defendant gone wall street journal said look know paying much like make little bit money buying stock stocks going appear heard street column wall street journal said fine deception wall street journal dishonesty aspect misappropriation might eliminated via disclosure authorization wholly besides point dishonesty misappropriation relationship fiduciary principal relationship misappropriator market market transaction made less honest disclosure third party principal rather market whole far market concerned trade based confidential information honest third party may know long side trade remain dark majority statement arguing market advantage gained deception unfortunately seems embrace error logic conflating causation correlation misappropriator may deceive source simultaneously hurt public shows causal connection two fact sun gives people tan simultaneously nourishes plants demonstrates melanin production humans causes plants grow case element common deception harm theresult antecedent cause namely using non public information use even securities trading illegal consequential deception source follows entirely divergent branch causation harm public trader thus gains advantageous market position use nonpublic information whether deception involved deception effect existence extent advantage commission may purport interpreting rule rather statute provide greater leeway rule merely repeats verbatim statutory language entire question hinges furthermore even majority recognizes rule may reach beyond scope ante thus commission obligated explain theory fits within interpretation even purports interpreting derivative rule although majority leaves open possibility rule may justified means preventing warehousing rely justification support conclusion case suffice say commission concedes warehousing involve fraud defined cases see reply brief thus preventing warehousing serve justify rule even defining authority subject construction given commission strong constitutional reasons construing law simply stated shall unlawful however shall defined independent agency seem offer intelligible principle guide agency discretion thus raise serious delegation concerns even current jurisprudence hampton see also field clark distinguishing making law determining shall executing law determining facts law operation depends commission interpretation convert precisely type law described thus even plausible interpretation usual practice avoid unnecessary interpretations statutory language call constitutionality statute serious doubt note rule also applies persons trading upon information obtained insider target company insofar rule seeks prevent behavior fraudulent classical theory insider trading aspect myanalysis apply majority notes however government prosecuted classical theory ante hence proviso application present case even information obtained agent bidder tippee claims known tipper violated duty still justification rule first circumstances tipper violated fiduciary duty liable misappropriation theory assuming theory valid facing liability reason suspect tipper gratuitously protect tippee tipper accurately testifies tippee falsely told information passed withoutviolating tipper duties one question whether tippee fact done anything illegal even commission misappropriation theory given fraudulent breach fiduciary duty complete moment tip subsequent trading information tippee might well fail even commission construction connection requirement see supra thus even tipper might circumstances inclined protect tippee see ante doubtful tippee violated misappropriation theory event thus preventing nonviolations justify rule second even scenario legitimate concern justify eliminating requirement tippee know breach duty explain rule elimination requirement breach majority may find strange mail fraud net broader reaching securities fraud net ante supposed strangeness resulting allocation prosecutorial responsibility commission various attorneys business adequately addressed congress perceives problem regarding jurisdictional boundaries among nation prosecutors majority believes upon shifting securities fraud mail fraud prosecutions practical consequences individual defendants might large undermines supposed policy justifications today decision makes baffling majority willingness go great lengths save commission