674
Opinion of the Court
In adopting the "disclose or abstain" rule, the SEC explained:
"The Commission has previously expressed and continues to have serious concerns about trading by persons in possession of material, nonpublic information relating to a tender offer. This practice results in unfair disparities in market information and market disruption. Security holders who purchase from or sell to such persons are effectively denied the benefits of disclosure and the substantive protections of the Williams Act. If furnished with the information, these security holders would be able to make an informed investment decision, which could involve deferring the purchase or sale of the securities until the material information had been disseminated or until the tender offer had been commenced or terminated." 45 Fed. Reg. 60412 (1980) (footnotes omitted).
The Commission thus justified Rule 14e-3(a) as a means necessary and proper to assure the efficacy of Williams Act protections.
The United States emphasizes that Rule 14e-3(a) reaches trading in which "a breach of duty is likely but difficult to prove." Reply Brief 16. "Particularly in the context of a tender offer," as the Tenth Circuit recognized, "there is a fairly wide circle of people with confidential information," Peters, 978 F. 2d, at 1167, notably, the attorneys, investment
ported only to define, not to prevent. See post, at 696. Justice Thomas sees this precision in Rule 14e-3(a)'s words: "it shall constitute a fraudulent . . . act . . . within the meaning of section 14(e) . . . ." We do not find the Commission's Rule vulnerable for failure to recite as a regulatory preamble: We hereby exercise our authority to "define, and prescribe means reasonably designed to prevent, . . . [fraudulent] acts." Sensibly read, the Rule is an exercise of the Commission's full authority. Logically and practically, such a rule may be conceived and defended, alternatively, as definitional or preventive.
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