United States v. O'Hagan, 521 U.S. 642, 3 (1997)

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the information and harms members of the investing public, the misappropriation theory is tuned to an animating purpose of the Exchange Act: to ensure honest markets, thereby promoting investor confidence. It would make scant sense to hold a lawyer-turned-trader like O'Hagan a § 10(b) violator if he works for a law firm representing the target of a tender offer, but not if he works for a firm representing the bidder. The statute's text requires no such result. Pp. 653-659. (c) The Eighth Circuit erred in holding that the misappropriation theory is inconsistent with § 10(b). First, that court understood the theory to require neither misrepresentation nor nondisclosure; as this Court explains, however, deceptive nondisclosure is essential to § 10(b) liability under the theory. Concretely, it was O'Hagan's failure to disclose his personal trading to Grand Met and Dorsey, in breach of his duty to do so, that made his conduct "deceptive" under § 10(b). Second, the Eighth Circuit misread this Court's precedents when it ruled that, under Chiarella v. United States, 445 U. S. 222, 230, 232, 233; Dirks v. SEC, 463 U. S. 646, 655; and Central Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A., 511 U. S. 164, 191, only a breach of a duty to parties to a securities transaction, or, at the most, to other market participants such as investors, is sufficient to give rise to § 10(b) liability. Chiarella, 445 U. S., at 238, 239, 240-243, 245, expressly left open the question of the misappropriation theory's validity, and Dirks, 463 U. S., at 665, 666-667, also left room for application of the misappropriation theory in cases such as this one. Central Bank's discussion concerned only private civil litigation under § 10(b) and Rule 10b-5, not criminal liability. Pp. 660-665. (d) Vital to this Court's decision that criminal liability may be sustained under the misappropriation theory is the Exchange Act's requirement that the Government prove that a person "willfully" violated Rule 10b-5 in order to establish a criminal violation, and the Act's provision that a defendant may not be imprisoned for such a violation if he proves that he had no knowledge of the Rule. The requirement of culpable intent weakens O'Hagan's charge that the misappropriation theory is too indefinite to permit the imposition of criminal liability. See Boyce Motor Lines, Inc. v. United States, 342 U. S. 337, 342. The Eighth Circuit may address on remand O'Hagan's other challenges to his § 10(b) and Rule 10b-5 convictions. Pp. 665-666. 2. As relevant to this case, the SEC did not exceed its rulemaking authority under § 14(e) by adopting Rule 14e-3(a) without requiring a showing that the trading at issue entailed a breach of fiduciary duty. Section 14(e) prohibits "fraudulent . . . acts . . . in connection with any tender offer," and authorizes the SEC to "define, and prescribe means reasonably designed to prevent, such acts." Adopted under that statu-

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