644 UNITED STATES
O’HAGANSyllabusthe information and harms members of the investing public, the misap-propriation theory is tuned to an animating purpose of the ExchangeAct: to ensure honest markets, thereby promoting investor conﬁdence.It would make scant sense to hold a lawyer-turned-trader like O’Hagana §10(b) violator if he works for a law ﬁrm representing the target of atender 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 misappropriationtheory is inconsistent with §10(b). First, that court understood thetheory to require neither misrepresentation nor nondisclosure; as thisCourt explains, however, deceptive nondisclosure is essential to §10(b)liability under the theory. Concretely, it was O’Hagan’s failure to dis-close his personal trading to Grand Met and Dorsey, in breach of hisduty 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
445 U. S. 222, 230, 232, 233;
463 U. S. 646, 655; and
Central Bank of Denver, N. A.
FirstInterstate Bank of Denver, N. A.,
511 U. S. 164, 191, only a breach of aduty to parties to a securities transaction, or, at the most, to other mar-ket participants such as investors, is sufﬁcient to give rise to §10(b)liability.
445 U. S., at 238, 239, 240–243, 245, expressly leftopen the question of the misappropriation theory’s validity, and
463 U. S., at 665, 666–667, also left room for application of the misappro-priation theory in cases such as this one.
’s discussionconcerned only private civil litigation under §10(b) and Rule 10b–5, notcriminal liability. Pp. 660–665.(d) Vital to this Court’s decision that criminal liability may be sus-tained under the misappropriation theory is the Exchange Act’s require-ment that the Government prove that a person “willfully” violated Rule10b–5 in order to establish a criminal violation, and the Act’s provisionthat a defendant may not be imprisoned for such a violation if he provesthat he had no knowledge of the Rule. The requirement of culpableintent weakens O’Hagan’s charge that the misappropriation theory istoo indeﬁnite to permit the imposition of criminal liability. See
BoyceMotor Lines, Inc.
342 U. S. 337, 342. The Eighth Cir-cuit 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 rulemakingauthority under §14(e) by adopting Rule 14e–3(a) without requiring ashowing that the trading at issue entailed a breach of ﬁduciary duty.Section 14(e) prohibits “fraudulent . . . acts . . . in connection with anytender offer,” and authorizes the SEC to “deﬁne, and prescribe meansreasonably designed to prevent, such acts.” Adopted under that statu-