Mr. Justice Murphy

delivered the opinion of the Court.

This case involves the application of § 2 (1) of the Securities Act of 19331 to an offering of units of a citrus grove development coupled with a contract for cultivating, marketing and remitting the net proceeds to the investor.

The Securities and Exchange Commission instituted this action to restrain the respondents from using the mails and instrumentalities of interstate commerce in the offer and sale of unregistered and non-exempt securities in violation of § 5 (a) of the Act. The District Court denied the injunction, 60 F. Supp. 440, and the Fifth Circuit Court of Appeals affirmed the judgment, 151 F. 2d 714. We granted certiorari on a petition alleging that the ruling of the Circuit Court of Appeals conflicted with other federal and state decisions and that it introduced a novel and unwarranted test under the statute which the Commission regarded as administratively impractical.

Most of the facts are stipulated. The respondents, W. J. Howey Company and Howey-in-the-Hills Service, *295Inc., are Florida corporations under direct common control and management. The Howey Company owns large tracts of citrus acreage in Lake County, Florida. During the past several years it has planted about 500 acres annually, keeping half of the groves itself and offering the other half to the public “to help us finance additional development.” Howey-in-the-Hills Service, Inc., is a service company engaged in cultivating and developing many of these groves, including the harvesting and marketing of the crops.

Each prospective customer is offered both a land sales contract and a service contract, after having been told that it is not feasible to invest in a grove unless service arrangements are made. While the purchaser is free to make arrangements with other service companies, the superiority of Howey-in-the-Hills Service, Inc., is stressed. Indeed, 85% of the acreage sold during the 3-year period ending May 31, 1943, was covered by service contracts with Howey-in-the-Hills Service, Inc.

The land sales contract with the Howey Company provides for a uniform purchase price per acre or fraction thereof, varying in amount only in accordance with the number of years the particular plot has been planted with citrus trees. Upon full payment of the purchase price the land is conveyed to the purchaser by warranty deed. Purchases are usually made in narrow strips of land arranged so that an acre consists of a row of 48 trees. During the period between February 1, 1941, and May 31, 1943, 31 of the 42 persons making purchases bought less than 5 acres each. The average holding of these 31 persons was 1.33 acres and sales of as little as 0.65, 0.7 and 0.73 of an acre were made. These tracts are not separately fenced and the sole indication of several ownership is found in small land marks intelligible only through a plat book record.

*296The service contract, generally of a 10-year duration without option of cancellation, gives Howey-in-the-Hills Service, Inc., a leasehold interest and “full and complete” possession of the acreage. For a specified fee plus the cost of labor and materials, the company is given full discretion and authority over the cultivation of the groves and the harvest and marketing of the crops. The company is well established in the citrus business and maintains a large force of skilled personnel and a great deal of equipment, including 75 tractors, sprayer wagons, fertilizer trucks and the like. Without the consent of the company, the land owner or purchaser has no right of entry to market the crop;2 thus there is ordinarily no right to specific fruit. The company is accountable only for an allocation of the net profits based upon a check made at the time of picking. All the produce is pooled by the respondent companies, which do business under their own names.

The purchasers for the most part are non-residents of Florida. They are predominantly business and professional people who lack the knowledge, skill and equipment necessary for the care and cultivation of citrus trees. They are attracted by the expectation of substantial profits. It was represented, for example, that profits during the 1943-1944 season amounted to 20% and that even greater profits might be expected during the 1944-1945 season, although only a 10% annual return was to be expected over a 10-year period. Many of these purchasers are patrons of a resort hotel owned and operated by the Howey Company in a scenic section adjacent to the groves. The hotel’s advertising mentions the fine groves in the vicinity and the attention of the patrons is drawn to the *297groves as they are being escorted about the surrounding countryside. They are told that the groves are for sale; if they indicate an interest in the matter they are then given a sales talk.

It is admitted that the mails and instrumentalities of interstate commerce are used in the sale of the land and service contracts and that no registration statement or letter of notification has ever been filed with the Commission in accordance with the Securities Act of 1933 and the rules and regulations thereunder.

Section 2 (1) of the Act defines the term “security” to include the commonly known documents traded for speculation or investment.3 This definition also includes “securities” of a more variable character, designated by such descriptive terms as “certificate of interest or participation in any profit-sharing agreement,” “investment contract” and “in general, any interest or instrument commonly known as a ‘security.’ ” The legal issue in this case turns upon a determination of whether, under the circumstances, the land sales contract, the warranty deed and the service contract together constitute an “investment contract” within the meaning of § 2 (1). An affirmative answer brings into operation the registration requirements of § 5 (a), unless the security is granted an exemption under § 3 (b). The lower courts, in reaching a negative answer to this problem, treated the contracts and deeds *298as separate transactions involving no more than an ordinary real estate sale and an agreement by the seller to manage the property for the buyer.

The term “investment contract”’ is undefined by the Securities Act or by relevant legislative reports. But the term was common in many state “blue sky” laws in existence prior to the adoption of the federal statute and, although the term was also undefined by the state laws, it had been broadly construed by state courts so as to afford the investing public a full measure of protection. Form was disregarded for substance and emphasis was placed upon economic reality. An investment contract thus came to mean a contract or scheme for “the placing of capital or laying out of money in a way intended to secure income or profit from its employment.” State v. Gopher Tire & Rubber Co., 146 Minn. 52, 56, 177 N. W. 937, 938. This definition was uniformly applied by state courts to a variety of situations where individuals were led to invest money in a common enterprise with the expectation that they would earn a profit solely through the efforts of the promoter or of some one other than themselves.4

By including an investment contract within the scope of § 2 (1) of the Securities Act, Congress was using a term the meaning of which had been crystallized by this prior judicial interpretation. It is therefore reasonable to attach that meaning to the term as used by Congress, especially since such a definition is consistent with the statutory aims. In other words, an investment contract for purposes of the Securities Act means a contract, trans*299action or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party, it being immaterial whether the shares in the enterprise are evidenced by formal certificates or by nominal interests in the physical assets employed in the enterprise. Such a definition necessarily underlies this Court's decision in S. E. C. v. Joiner Corp., 320 U. S. 344, and has been enunciated and applied many times by lower federal courts.5 It permits the fulfillment of the statutory purpose of compelling full and fair disclosure relative to the issuance of “the many types of instruments that in our commercial world fall within the ordinary concept of a security.” H. Rep. No. 85, 73d Cong., 1st Sess., p. 11. It embodies a flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits.

The transactions in this case clearly involve investment contracts as so defined. The respondent companies are offering something more than fee simple interests in land, something different from a farm or orchard coupled with management services. They are offering an opportunity to contribute money and to share in the profits of a large citrus fruit enterprise managed and partly owned by respondents. They are offering this opportunity to persons who reside in distant localities and who lack the equip*300ment and experience requisite to the cultivation, harvesting and marketing of the citrus products. Such persons have no desire to occupy the land or to develop it themselves; they are attracted solely by the prospects of a return on their investment. Indeed, individual development of the plots of land that are offered and sold would seldom be economically feasible due to their small size. Such tracts gain utility as citrus groves only when cultivated and developed as component parts of a larger area. A common enterprise managed by respondents or third parties with adequate personnel and equipment is therefore essential if the investors are to achieve their paramount aim of a return on their investments. Their respective shares in this enterprise are evidenced by land sales contracts and warranty deeds, which serve as a convenient method of determining the investors’ allocable shares of the profits. The resulting transfer of rights in land is purely incidental.

Thus all the elements of a profit-seeking business venture are present here. The investors provide the capital and share in the earnings and profits; the promoters manage, control and operate the enterprise. It follows that the arrangements whereby the investors’ interests are made manifest involve investment contracts, regardless of the legal terminology in which such contracts are clothed. The investment contracts in this instance take the form of land sales contracts, warranty deeds and service contracts which respondents offer to prospective investors. And respondents’ failure to abide by the statutory and administrative rules in making such offerings, even though the failure result from a bona fide mistake as to the law, cannot be sanctioned under the Act.

This conclusion is unaffected by the fact that some purchasers choose not to accept the full offer of an investment contract by declining to enter into a service contract with *301the respondents. The Securities Act prohibits the offer as well as the sale of unregistered, non-exempt securities.6 Hence it is enough that the respondents merely offer the essential ingredients of an investment contract.

We reject the suggestion of the Circuit Court of Appeals, 151 F. 2d at 717, that an investment contract is necessarily missing where the enterprise is not speculative or promotional in character and where the tangible interest which is sold has intrinsic value independent of the success of the enterprise as a whole. The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. If that test be satisfied, it is immaterial whether the enterprise is speculative or non-speculative or whether there is a sale of property with or without intrinsic value. See S. E. C. v. Joiner Corp., supra, 352. The statutory policy of affording broad protection to investors is not to be thwarted by unrealistic and irrelevant formulae.

Reversed.

Mr. Justice Jackson took no part in the consideration or decision of this case.

Mr. Justice Frankfurter,

dissenting.

“Investment contract” is not a term of art; it is a conception dependent upon the circumstances of a particular situation. If this case came before us on a finding authorized by Congress that the facts disclosed an “investment contract” within the general scope of § 2 (1) of the Securities Act, 48 Stat. 74,15 U. S. C. § 77b (1), the Securities and.Exchange Commission’s finding would govern, unless, on the record, it was wholly unsupported. But *302that is not the case before us. Here the ascertainment of the existence of an “investment contract” had to be made independently by the District Court and it found against its existence. 60 F. Supp. 440. The Circuit Court of Appeals for the Fifth Circuit sustained that finding. 151 F. 2d 714. If respect is to be paid to the wise rule of judicial administration under which this Court does not upset concurrent findings of two lower courts in the ascertainment of facts and the relevant inferences to be drawn from them, this case clearly calls for its application. See Allen v. Trust Company of Georgia, 326 U. S. 630. For the crucial issue in this case turns on whether the contracts for the land and the contracts for the management of the property were in reality separate agreements or merely parts of a single transaction. It is clear from its opinion that the District Court was warranted in its conclusion that the record does not establish the existence of an investment contract:

“. . . the record in this case shows that not a single sale of citrus grove property was made by the Howey Company during the period involved in this suit, except to purchasers who actually inspected the property before purchasing the same. The record further discloses that no purchaser is required to engage the Service Company to care for his property and that of the fifty-one purchasers acquiring property during this period, only forty-two entered into contracts with the Service Company for the care of the property.” 60 F. Supp. at 442.

Simply because other arrangements may have the appearances of this transaction but are employed as an evasion of the Securities Act does not mean that the present contracts were evasive. I find nothing in the Securities Act to indicate that Congress meant to bring every innocent transaction within the scope of the Act simply because a perversion of them is covered by the Act.

Justice Powell

delivered the opinion of the Court.

Petitioner Raymond Dirks received material nonpublic information from “insiders” of a corporation with which he had no connection. He disclosed this information to investors who relied on it in trading in the shares of the corporation. The question is whether Dirks violated the antifraud provisions of the federal securities laws by this disclosure.

I

In 1973, Dirks was an officer of a New York broker-dealer firm who specialized in providing investment analysis of insurance company securities to institutional investors.1 On *649March 6, Dirks received information from Ronald Secrist, a former officer of Equity Funding of America. Secrist alleged that the assets of Equity Funding, a diversified corporation primarily engaged in selling life insurance and mutual funds, were vastly overstated as the result of fraudulent corporate practices. Secrist also stated that various regulatory agencies had failed to act on similar charges made by Equity Funding employees. He urged Dirks to verify the fraud and disclose it publicly.

Dirks decided to investigate the allegations. He visited Equity Funding’s headquarters in Los Angeles and interviewed several officers and employees of the corporation. The senior management denied any wrongdoing, but certain corporation employees corroborated the charges of fraud. Neither Dirks nor his firm owned or traded any Equity Funding stock, but throughout his investigation he openly discussed the information he had obtained with a number of clients and investors. Some of these persons sold their holdings of Equity Funding securities, including five investment advisers who liquidated holdings of more than $16 million.2

While Dirks was in Los Angeles, he was in touch regularly with William Blundell, the Wall Street Journal’s Los Angeles bureau chief. Dirks urged Blundell to write a story on the fraud allegations. Blundell did not believe, however, that such a massive fraud could go undetected and declined to *650write the story. He feared that publishing such damaging hearsay might be libelous.

During the 2-week period in which Dirks pursued his investigation and spread word of Secrist’s charges, the price of Equity Funding stock fell from $26 per share to less than $15 per share. This led the New York Stock Exchange to halt trading on March 27. Shortly thereafter California insurance authorities impounded Equity Funding’s records and uncovered evidence of the fraud. Only then did the Securities and Exchange Commission (SEC) file a complaint against Equity Funding3 and only then, on April 2, did the Wall Street Journal publish a front-page story based largely on information assembled by Dirks. Equity Funding immediately went into receivership.4

The SEC began an investigation into Dirks’ role in the exposure of the fraud. After a hearing by an Administrative Law Judge, the SEC found that Dirks had aided and abetted violations of § 17(a) of the Securities Act of 1933, 48 Stat. 84, as amended, 15 U. S. C. §77q(a),5 § 10(b) of the Securities

*651Exchange Act of 1934, 48 Stat. 891, 15 U. S. C. §78j(b),6 and SEC Rule 10b-5, 17 CFR §240.10b-5 (1983),7 by repeating the allegations of fraud to members of the investment community who later sold their Equity Funding stock. The SEC concluded: “Where ‘tippees’ — regardless of their motivation or occupation — come into possession of material ‘corporate information that they know is confidential and know or should know came from a corporate insider,’ they must either publicly disclose that information or refrain from trading.” 21 S. E. C. Docket 1401, 1407 (1981) (footnote omitted) (quoting Chiarella v. United States, 445 U. S. 222, 230, n. 12 (1980)). Recognizing, however, that Dirks “played an important role in bringing [Equity Funding’s] massive fraud *652to light,” 21 S. E. C. Docket, at 1412,8 the SEC only censured him.9

Dirks sought review in the Court of Appeals for the District of Columbia Circuit. The court entered judgment against Dirks “for the reasons stated by the Commission in its opinion.” App. to Pet. for Cert. C-2. Judge Wright, a member of the panel, subsequently issued an opinion. Judge Robb concurred in the result and Judge Tamm dissented; neither filed a separate opinion. Judge Wright believed that “the obligations of corporate fiduciaries pass to all those to whom they disclose their information before it has been disseminated to the public at large.” 220 U. S. App. D. C. 309, 324, 681 F. 2d 824, 839 (1982). Alternatively, Judge Wright concluded that, as an employee of a broker-dealer, Dirks had violated “obligations to the SEC and to the public completely independent of any obligations he acquired” as a result of receiving the information. Id., at 325, 681 F. 2d, at 840.

In view of the importance to the SEC and to the securities industry of the question presented by this case, we granted a writ of certiorari. 459 U. S. 1014 (1982). We now reverse.

*653H-H I — I

In the seminal case of In re Cady, Roberts & Co., 40 S. E. C. 907 (1961), the SEC recognized that the common law in some jurisdictions imposes on “corporate ‘insiders,’ particularly officers, directors, or controlling stockholders” an “affirmative duty of disclosure . . . when dealing in securities.” Id., at 911, and n. 13.10 The SEC found that not only did breach of this common-law duty also establish the elements of a Rule 10b-5 violation,11 but that individuals other than corporate insiders could be obligated either to disclose material nonpublic information12 before trading or to abstain from trading altogether. Id., at 912. In Chiarella, we accepted the two elements set out in Cady, Roberts for establishing a Rule 10b-5 violation: “(i) the existence of a relationship affording access to inside information intended to be available only for a corporate purpose, and (ii) the unfairness of allowing a corporate insider to take advantage of that in*654formation by trading without disclosure.” 445 U. S., at 227. In examining whether Chiarella had an obligation to disclose or abstain, the Court found that there is no general duty to disclose before trading on material nonpublic information,13 and held that “a duty to disclose under § 10(b) does not arise from the mere possession of nonpublic market information.” Id., at 235. Such a duty arises rather from the existence of a fiduciary relationship. See id., at 227-235.

Not “all breaches of fiduciary duty in connection -with a securities transaction,” however, come within the ambit of Rule 10b-5. Santa Fe Industries, Inc. v. Green, 430 U. S. 462, 472 (1977). There must also be “manipulation or deception.” Id., at 473. In an inside-trading case this fraud derives from the “inherent unfairness involved where one takes advantage” of “information intended to be available only for a corporate purpose and not for the personal benefit of anyone.” In re Merrill Lynch, Pierce, Fenner & Smith, Inc., 43 S. E. C. 933, 936 (1968). Thus, an insider will be liable under Rule 10b-5 for inside trading only where he fails to disclose material nonpublic information before trading on it and thus makes “secret profits.” Cady, Roberts, supra, at 916, n. 31.

Ill

We were explicit in Chiarella in saying that there can be no duty to disclose where the person who has traded on inside information “was not [the corporation’s] agent, . . . was not a fiduciary, [or] was not a person in whom the sellers [of the securities] had placed their trust and confidence.” 445 U. S., at 232. Not to require such a fiduciary relationship, we recognized, would “depar[t] radically from the established doctrine that duty arises from a specific relationship between *655two parties” and would amount to “recognizing a general duty between all participants in market transactions to forgo actions based on material, nonpublic information.” Id., at 232, 233. This requirement of a specific relationship between the shareholders and the individual trading on inside information has created analytical difficulties for the SEC and courts in policing tippees who trade on inside information. Unlike insiders who have independent fiduciary duties to both the corporation and its shareholders, the typical tippee has no such relationships.14 In view of this absence, it has been unclear how a tippee acquires the Cady, Roberts duty to refrain from trading on inside information.

A

The SEC’s position, as stated in its opinion in this case, is that a tippee “inherits” the Cady, Roberts obligation to shareholders whenever he receives inside information from an insider:

“In tipping potential traders, Dirks breached a duty which he had assumed as a result of knowingly receiving *656confidential information from [Equity Funding] insiders. Tippees such as Dirks who receive non-public, material information from insiders become ‘subject to the same duty as [the] insiders. ’ Shapiro v. Merrill Lynch, Pierce, Fenner & Smith, Inc. [495 F. 2d 228, 237 (CA2 1974) (quoting Ross v. Licht, 263 F. Supp. 395, 410 (SDNY 1967))]. Such a tippee breaches the fiduciary duty which he assumes from the insider when the tippee knowingly transmits the information to someone who will probably trade on the basis thereof. . . . Presumably, Dirks’ informants were entitled to disclose the [Equity Funding] fraud in order to bring it to light and its perpetrators to justice. However, Dirks — standing in their shoes — committed a breach of the fiduciary duty which he had assumed in dealing with them, when he passed the information on to traders.” 21 S. E. C. Docket, at 1410, n. 42.

This view differs little from the view that we rejected as inconsistent with congressional intent in Chiarella. In that case, the Court of Appeals agreed with the SEC and affirmed Chiarella’s conviction, holding that “[ajnyone — corporate insider or not — who regularly receives material nonpublic information may not use that information to trade in securities without incurring an affirmative duty to disclose.” United States v. Chiarella, 588 F. 2d 1358, 1365 (CA2 1978) (emphasis in original). Here, the SEC maintains that anyone who knowingly receives nonpublic material information from an insider has a fiduciary duty to disclose before trading.15

*657In effect, the SEC’s theory of tippee liability in both cases appears rooted in the idea that the antifraud provisions require equal information among all traders. This conflicts with the principle set forth in Chiarella that only some persons, under some circumstances, will be barred from trading while in possession of material nonpublic information.16 Judge Wright correctly read our opinion in Chiarella as repudiating any notion that all traders must enjoy equal information before trading: “[T]he ‘information’ theory is rejected. Because the disclose-or-refrain duty is extraordinary, it attaches only when a party has legal obligations other than a mere duty to comply with the general antifraud proscriptions in the federal securities laws.” 220 U. S. App. D. C., at 322, 681 F. 2d, at 837. See Chiarella, 445 U. S., at 235, n. 20. We reaffirm today that “[a] duty [to disclose] *658arises from the relationship between parties . . . and not merely from one’s ability to acquire information because of his position in the market.” Id., at 231-232, n. 14.

Imposing a duty to disclose or abstain solely because a person knowingly receives material nonpublic information from an insider and trades on it could have an inhibiting influence on the role of market analysts, which the SEC itself recognizes is necessary to the preservation of a healthy market.17 It is commonplace for analysts to “ferret out and analyze information,” 21 S. E. C. Docket, at 1406,18 and this often is done by meeting with and questioning corporate officers and others who are insiders. And information that the analysts *659obtain normally may be the basis for judgments as to the market worth of a corporation’s securities. The analyst’s judgment in this respect is made available in market letters or otherwise to clients of the firm. It is the nature of this type of information, and indeed of the markets themselves, that such information cannot be made simultaneously available to all of the corporation’s stockholders or the public generally.

B

The conclusion that recipients of inside information do not invariably acquire a duty to disclose or abstain does not mean that such tippees always are free to trade on the information. The need for a ban on some tippee trading is clear. Not only are insiders forbidden by their fiduciary relationship from personally using undisclosed corporate information to their advantage, but they also may not give such information to an outsider for the same improper purpose of exploiting the information for their personal gain. See 15 U. S. C. § 78t(b) (making it unlawful to do indirectly “by means of any other person” any act made unlawful by the federal securities laws). Similarly, the transactions of those who knowingly participate with the fiduciary in such a breach are “as forbidden” as transactions “on behalf of the trustee himself.” Mosser v. Darrow, 341 U. S. 267, 272 (1951). See Jackson v. Smith, 254 U. S. 586, 589 (1921); Jackson v. Ludeling, 21 Wall. 616, 631-632 (1874). As the Court explained in Mosser, a contrary rule “would open up opportunities for devious dealings in the name of others that the trustee could not conduct in his own.” 341 U. S., at 271. See SEC v. Texas Gulf Sulphur Co., 446 F. 2d 1301, 1308 (CA2), cert. denied, 404 U. S. 1005 (1971). Thus, the tippee’s duty to disclose or abstain is derivative from that of the insider’s duty. See Tr. of Oral Arg. 38. Cf. Chiarella, 445 U. S., at 246, n. 1 (Blackmun, J., dissenting). As we noted in Chiarella, “[t]he tippee’s obligation has been viewed as arising from his role as a participant after the fact in the insider’s breach of a fiduciary duty.” Id., at 230, n. 12.

*660Thus, some tippees must assume an insider’s duty to the shareholders not because they receive inside information, but rather because it has been made available to them improperly. 19 And for Rule 10b-5 purposes, the insider’s disclosure is improper only where it would violate his Cady, Roberts duty. Thus, a tippee assumes a fiduciary duty to the shareholders of a corporation not to trade on material nonpublic information only when the insider has breached his fiduciary duty to the shareholders by disclosing the information to the tippee and the tippee knows or should know that there has been a breach.20 As Commissioner Smith perceptively ob*661served in In re Investors Management Co., 44 S. E. C. 633 (1971): “[TJippee responsibility must be related back to insider responsibility by a necessary finding that the tippee knew the information was given to him in breach of a duty by a person having a special relationship to the issuer not to disclose the information . . . Id., at 651 (concurring in result). Tipping thus properly is viewed only as a means of indirectly violating the Cady, Roberts disclose-or-abstain rule.21

C

In determining whether a tippee is under an obligation to disclose or abstain, it thus is necessary to determine whether the insider’s “tip” constituted a breach of the insider’s fiduciary duty. All disclosures of confidential corporate informa*662tion are not inconsistent with the duty insiders owe to shareholders. In contrast to the extraordinary facts of this case, the more typical situation in which there will be a question whether disclosure violates the insider’s Cady, Roberts duty is when insiders disclose information to analysts. See n. 16, supra. In some situations, the insider will act consistently with his fiduciary duty to shareholders, and yet release of the information may affect the market. For example, it may not be clear — either to the corporate insider or to the recipient analyst — whether the information will be viewed as material nonpublic information. Corporate officials may mistakenly think the information already has been disclosed or that it is not material enough to affect the market. Whether disclosure is a breach of duty therefore depends in large part on the purpose of the disclosure. This standard was identified by the SEC itself in Cady, Roberts: a purpose of the securities laws was to eliminate “use of inside information for personal advantage.” 40 S. E. C., at 912, n. 15. See n. 10, supra. Thus, the test is whether the insider personally will benefit, directly or indirectly, from his disclosure. Absent some personal gain, there has been no breach of duty to stockholders. And absent a breach by the insider, there is no derivative breach.22 As Commissioner Smith stated in Investors Management Co.: “It is important in this type of *663case to focus on policing insiders and what they do . . . rather than on policing information per se and its possession. . . 44 S. E. C., at 648 (concurring in result).

The SEC argues that, if inside-trading liability does not exist when the information is transmitted for a proper purpose but is used for trading, it would be a rare situation when the parties could not fabricate some ostensibly legitimate business justification for transmitting the information. We think the SEC is unduly concerned. In determining whether the insider’s purpose in making a particular disclosure is fraudulent, the SEC and the courts are not required to read the parties’ minds. Scienter in some cases is relevant in determining whether the tipper has violated his Cady, Roberts duty.23 But to determine whether the disclosure itself “deceive[s], manipulate^], or defraud[s]” shareholders, Aaron v. SEC, 446 U. S. 680, 686 (1980), the initial inquiry is whether there has been a breach of duty by the insider. This requires courts to focus on objective criteria, i. e., whether the insider receives a direct or indirect personal benefit from the disclosure, such as a pecuniary gain or a reputational benefit that will translate into future earnings. Cf. 40 S. E. C., at 912, n. 15; Brudney, Insiders, Outsiders, and Informational Advantages Under the Federal Securities *664Laws, 93 Harv. L. Rev. 322, 348 (1979) (“The theory ... is that the insider, by giving the information out selectively, is in effect selling the information to its recipient for cash, reciprocal information, or other things of value for himself . . .”)• There are objective facts and circumstances that often justify such an inference. For example, there may be a relationship between the insider and the recipient that suggests a quid pro quo from the latter, or an intention to benefit the particular recipient. The elements of fiduciary duty and exploitation of nonpublic information also exist when an insider makes a gift of confidential information to a trading relative or friend. The tip and trade resemble trading by the insider himself followed by a gift of the profits to the recipient.

Determining whether an insider personally benefits from a particular disclosure, a question of fact, will not always be easy for courts. But it is essential, we think, to have a guiding principle for those whose daily activities must be limited and instructed by the SEC’s inside-trading rules, and we believe that there must be a breach of the insider’s fiduciary duty before the tippee inherits the duty to disclose or abstain. In contrast, the rule adopted by the SEC in this case would have no limiting principle.24

*665h-H

Under the inside-trading and tipping rules set forth above, we find that there was no actionable violation by Dirks.25 It is undisputed that Dirks himself was a stranger to Equity Funding, with no pre-existing fiduciary duty to its shareholders.26 He took no action, directly or indirectly, that induced the shareholders or officers of Equity Funding to repose trust or confidence in him. There was no expectation by Dirks’ sources that he would keep their information in confidence. Nor did Dirks misappropriate or illegally obtain the information about Equity Funding. Unless the insiders breached their Cady, Roberts duty to shareholders in disclosing the nonpublic information to Dirks, he breached no duty when he passed it on to investors as well as to the Wall Street Journal.

*666It is clear that neither Secrist nor the other Equity Funding employees violated their Cady, Roberts duty to the corporation’s shareholders by providing information to Dirks.27 *667The tippers received no monetary or personal benefit for revealing Equity Funding’s secrets, nor was their purpose to make a gift of valuable information to Dirks. As the facts of this case clearly indicate, the tippers were motivated by a desire to expose the fraud. See supra, at 648-649. In the absence of a breach of duty to shareholders by the insiders, there was no derivative breach by Dirks. See n. 20, supra. Dirks therefore could not have been “a participant after the fact in [an] insider’s breach of a fiduciary duty.” Chiarella, 445 U. S., at 230, n. 12.

V

We conclude that Dirks, in the circumstances of this case, had no duty to abstain from use of the inside information that he obtained. The judgment of the Court of Appeals therefore is

Reversed.

Justice Blackmun,

with whom Justice Brennan and Justice Marshall join, dissenting.

The Court today takes still another step to limit the protections provided investors by § 10(b) of the Securities Ex*668change Act of 1934.1 See Chiarella v. United States, 445 U. S. 222, 246 (1980) (dissenting opinion). The device employed in this case engrafts a special motivational requirement on the fiduciary duty doctrine. This innovation excuses a knowing and intentional violation of an insider’s duty to shareholders if the insider does not act from a motive of personal gain. Even on the extraordinary facts of this case, such an innovation is not justified.

As the Court recognizes, ante, at 658, n. 18, the facts here are unusual. After a meeting with Ronald Secrist, a former Equity Funding employee, on March 7, 1973, App. 226, petitioner Raymond Dirks found himself in possession of material nonpublic information of massive fraud within the company.2 In the Court’s words, “[h]e uncovered . . . startling information that required no analysis or exercise of judgment as to *669its market relevance.” Ibid. In disclosing that information to Dirks, Secrist intended that Dirks would disseminate the information to his clients, those clients would unload their Equity Funding securities on the market, and the price would fall precipitously, thereby triggering a reaction from the authorities. App. 16, 25, 27.

Dirks complied with his informant’s wishes. Instead of reporting that information to the Securities and Exchange Commission (SEC or Commission) or to other regulatory agencies, Dirks began to disseminate the information to his clients and undertook his own investigation.3 One of his first steps was to direct his associates at Delafield Childs to draw up a list of Delafield clients holding Equity Funding securities. On March 12, eight days before Dirks flew to Los Angeles to investigate Secrist’s story, he reported the full allegations to Boston Company Institutional Investors, Inc., which on March 15 and 16 sold approximately $1.2 million of Equity securities.4 See id., at 199. As he gathered more *670information, he selectively disclosed it to his clients. To those holding Equity Funding securities he gave the “hard” story — all the allegations; others received the “soft” story — a recitation of vague factors that might reflect adversely on Equity Funding’s management. See id., at 211, n. 24.

Dirks’ attempts to disseminate the information to non-clients were feeble, at best. On March 12, he left a message for Herbert Lawson, the San Francisco bureau chief of The Wall Street Journal. Not until March 19 and 20 did he call Lawson again, and outline the situation. William Blundell, a Journal investigative reporter based in Los Angeles, got in touch with Dirks about his March 20 telephone call. On March 21, Dirks met with Blundell in Los Angeles. Blun-dell began his own investigation, relying in part on Dirks’ contacts, and on March 23 telephoned Stanley Sporkin, the SEC’s Deputy Director of Enforcement. On March 26, the next business day, Sporkin and his staff interviewed Blundell and asked to see Dirks the following morning. Trading was halted by the New York Stock Exchange at about the same time Dirks was talking to Los Angeles SEC personnel. The next day, March 28, the SEC suspended trading in Equity Funding securities. By that time, Dirks’ clients had unloaded close to $15 million of Equity Funding stock and the price had plummeted from $26 to $15. The effect of Dirks’ selective dissemination of Secrist’s information was that Dirks’ clients were able to shift the losses that were inevitable due to the Equity Funding fraud from themselves to uninformed market participants.

I — I 1 — 1

A

No one questions that Secrist himself could not trade on his inside information to the disadvantage of uninformed shareholders and purchasers of Equity Funding securities. See Brief for United States as Amicus Curiae 19, n. 12. Unlike the printer in Chiarella, Secrist stood in a fiduciary relation*671ship with these shareholders. As the Court states, ante, at 653, corporate insiders have an affirmative duty of disclosure when trading with shareholders of the corporation. See Chiarella, 445 U. S., at 227. This duty extends as well to purchasers of the corporation’s securities. Id., at 227, n. 8, citing Gratz v. Claughton, 187 F. 2d 46, 49 (CA2), cert. denied, 341 U. S. 920 (1951).

The Court also acknowledges that Secrist could not do by proxy what he was prohibited from doing personally. Ante, at 659; Mosser v. Darrow, 341 U. S. 267, 272 (1951). But this is precisely what Secrist did. Secrist used Dirks to disseminate information to Dirks’ clients, who in turn dumped stock on unknowing purchasers. Secrist thus intended Dirks to injure the purchasers of Equity Funding securities to whom Secrist had a duty to disclose. Accepting the Court’s view of tippee liability,5 it appears that Dirks’ knowledge of this breach makes him liable as a participant in the breach after the fact. Ante, at 659, 667; Chiarella, 445 U. S., at 230, n. 12.

B

The Court holds, however, that Dirks is not liable because Secrist did not violate his duty; according to the Court, this is so because Secrist did not have the improper purpose of personal gain. Ante, at 662-663,666-667. In so doing, the Court imposes a new, subjective limitation on the scope of the duty owed by insiders to shareholders. The novelty of this limitation is reflected in the Court’s lack of support for it.6

*672The insider’s duty is owed directly to the corporation’s shareholders.7 See Langevoort, Insider Trading and the Fiduciary Principle: A Post -Chiarella Restatement, 70 Calif. L. Rev. 1, 5 (1982); 3A W. Fletcher, Cyclopedia of the Law of Private Corporations §1168.2, pp. 288-289 (rev. ed. 1975). As Chiarella recognized, it is based on the relationship of trust and confidence between the insider and the shareholder. 445 U. S., at 228. That relationship assures the shareholder that the insider may not take actions that will harm him unfairly.8 The affirmative duty of disclosure pro*673tects against this injury. See Pepper v. Litton, 308 U. S. 295, 307, n. 15 (1939); Strong v. Repide, 213 U. S. 419, 431-434 (1909); see also Chiarella, 445 U. S., at 228, n. 10; cf. Pepper, 308 U. S., at 307 (fiduciary obligation to corporation exists for corporation’s protection).

C

The fact that the insider himself does not benefit from the breach does not eradicate the shareholder’s injury.9 Cf. Restatement (Second) of Trusts § 205, Comments c and d (1959) (trustee liable for acts causing diminution of value of trust); 3 *674A. Scott, Law of Trusts § 205, p. 1665 (3d ed. 1967) (trustee liable for any losses to trust caused by his breach). It makes no difference to the shareholder whether the corporate insider gained or intended to gain personally from the transaction; the shareholder still has lost because of the insider’s misuse of nonpublic information. The duty is addressed not to the insider’s motives,10 but to his actions and their consequences on the shareholder. Personal gain is not an element of the breach of this duty.11

*675This conclusion is borne out by the Court’s decision in Mosser v. Darrow, 341 U. S. 267 (1951). There, the Court faced an analogous situation: a reorganization trustee engaged two employee-promoters of subsidiaries of the companies being reorganized to provide services that the trustee considered to be essential to the successful operation of the trust. In order to secure their services, the trustee expressly agreed with the employees that they could continue to trade in the securities of the subsidiaries. The employees then turned their inside position into substantial profits at the expense both of the trust and of other holders of the companies’ securities.

The Court acknowledged that the trustee neither intended to nor did in actual fact benefit from this arrangement; his motives were completely selfless and devoted to the companies. Id., at 275. The Court, nevertheless, found the trustee liable to the estate for the activities of the employees he authorized.12 The Court described the trustee’s defalcation as “a willful and deliberate setting up of an interest in employees adverse to that of the trust.” Id., at 272. The breach did not depend on the trustee’s personal gain, and his motives in violating his duty were irrelevant; like Secrist, the trustee intended that others would abuse the inside information for their personal gain. Cf. Dodge v. Ford Motor Co., 204 Mich. 459, 506-509, 170 N. W. 668, 684-685 (1919) (Henry Ford’s philanthropic motives did not permit him to *676set Ford Motor Company dividend policies to benefit public at expense of shareholders).

As Mosser demonstrates, the breach consists in taking action disadvantageous to the person to whom one owes a duty. In this case, Secrist owed a duty to purchasers of Equity Funding shares. The Court’s addition of the bad-purpose element to a breach-of-fiduciary-duty claim is flatly inconsistent with the principle of Mosser. I do not join this limitation of the scope of an insider’s fiduciary duty to shareholders.13

HH HH

The improper-purpose requirement not only has no basis in law, but it also rests implicitly on a policy that I cannot accept. The Court justifies Seerist’s and Dirks’ action because the general benefit derived from the violation of Secrist’s duty to shareholders outweighed the harm caused to those *677shareholders, see Heller, Chiarella, SEC Rule 14e-3 and Dirks: “Fairness” versus Economic Theory, 37 Bus. Lawyer 517, 550 (1982); Easterbrook, Insider Trading, Secret Agents, Evidentiary Privileges, and the Production of Information, 1981 S. Ct. Rev. 309, 338 — in other words, because the end justified the means. Under this view, the benefit conferred on society by Secrist’s and Dirks’ activities may be paid for with the losses caused to shareholders trading with Dirks’ clients.14

Although Secrist’s general motive to expose the Equity Funding fraud was laudable, the means he chose were not. Moreover, even assuming that Dirks played a substantial role in exposing the fraud,15 he and his clients should not profit from the information they obtained from Secrist. Misprision of a felony long has been against public policy. Branzburg v. Hayes, 408 U. S. 665, 696-697 (1972); see 18 U. S. C. §4. A person cannot condition his transmission of information of a crime on a financial award. As a citizen, Dirks had at least an ethical obligation to report the information to the proper authorities. See ante, at 661, n. 21. The Court’s holding is deficient in policy terms not because it fails to create a legal *678norm out of that ethical norm, see ibid., but because it actually rewards Dirks for his aiding and abetting.

Dirks and Secrist were under a duty to disclose the information or to refrain from trading on it.16 I agree that disclosure in this case would have been difficult. Ibid. I also recognize that the SEC seemingly has been less than helpful in its view of the nature of disclosure necessary to satisfy the disclose-or-refrain duty. The Commission tells persons with inside information that they cannot trade on that information unless they disclose; it refuses, however, to tell them how to disclose.17 See In re Faberge, Inc., 45 S. E. C. 249, 256 (1973) (disclosure requires public release through public media designed to reach investing public generally). This seems to be a less than sensible policy, which it is incumbent on the Commission to correct. The Court, however, has no authority to remedy the problem by opening a hole in the congressionally mandated prohibition on insider trading, thus rewarding such trading.

H <

In my view, Secrist violated his duty to Equity Funding shareholders by transmitting material nonpublic information *679to Dirks with the intention that Dirks would cause his clients to trade on that information. Dirks, therefore, was under a duty to make the information publicly available or to refrain from actions that he knew would lead to trading. Because Dirks caused his clients to trade, he violated § 10(b) and Rule 10b-5. Any other result is a disservice to this country’s attempt to provide fair and efficient capital markets. I dissent.

Justice Ginsburg

delivered the opinion of the Court.

This case concerns the interpretation and enforcement of § 10(b) and § 14(e) of the Securities Exchange Act of 1934, and rules made by the Securities and Exchange Commission pursuant to these provisions, Rule 10b-5 and Rule 14e-3(a). *647Two prime questions are presented. The first relates to the misappropriation of material, nonpublic information for securities trading; the second concerns fraudulent practices in the tender offer setting. In particular, we address and resolve these issues: (1) Is a person who trades in securities for personal profit, using confidential information misappropriated in breach of a fiduciary duty to the source of the information, guilty of violating § 10(b) and Rule 10b-5? (2) Did the Commission exceed its rulemaking authority by adopting Rule 14e-3(a), which proscribes trading on undisclosed information in the tender offer setting, even in the absence of a duty to disclose? Our answer to the first question is yes, and to the second question, viewed in the context of this case, no.

I

Respondent James Herman O’Hagan was a partner in the law firm of Dorsey & Whitney in Minneapolis, Minnesota. In July 1988, Grand Metropolitan PLC (Grand Met), a company based in London, England, retained Dorsey & Whitney as local counsel to represent Grand Met regarding a potential tender offer for the common stock of the Pillsbury Company, headquartered in Minneapolis. Both Grand Met and Dorsey & Whitney took precautions to protect the confidentiality of Grand Met’s tender offer plans. O’Hagan did no work on the Grand Met representation. Dorsey & Whitney withdrew from representing Grand Met on September 9, 1988. Less than a month later, on October 4,1988, Grand Met publicly announced its tender offer for Pillsbury stock.

On August 18, 1988, while Dorsey & Whitney was still representing Grand Met, O’Hagan began purchasing call options for Pillsbury stock. Each option gave him the right to purchase 100 shares of Pillsbury stock by a specified date in September 1988. Later.in August and in September, O’Hagan made additional purchases of Pillsbury call options. By the end of September, he owned 2,500 unexpired Pillsbury options, apparently more than any other individual in*648vestor. See App. 85,148. O’Hagan also purchased, in September 1988, some 5,000 shares of Pillsbury common stock, at a price just under $39 per share. When Grand Met announced its tender offer in October, the price of Pillsbury stock rose to nearly $60 per share. O’Hagan then sold his Pillsbury call options and common stock, making a profit of more than $4.3 million.

The Securities and Exchange Commission (SEC or Commission) initiated an investigation into O’Hagan’s transactions, culminating in a 57-count indictment. The indictment alleged that O’Hagan defrauded his law firm and its client, Grand Met, by using for his own trading purposes material, nonpublic information regarding Grand Met’s planned tender offer. Id., at 8.1 According to the indictment, O’Hagan used the profits he gained through this trading to conceal his previous embezzlement and conversion of unrelated client trust funds. Id., at 10.2 O’Hagan was charged with 20 counts of mail fraud, in violation of 18 U. S. C. § 1341; 17 counts of securities fraud, in violation of § 10(b) of the Securities Exchange Act of 1934 (Exchange Act), 48 Stat. 891, 15 U.S.C. § 78j(b), and SEC Rule 10b-6, 17 CFR §240.10b-5 *649(1996); 17 counts of fraudulent trading in connection with a tender offer, in violation of § 14(e) of the Exchange Act, 15 U. S. C. § 78n(e), and SEC Rule 14e-3(a), 17 CFR §240.14e-3(a) (1996); and 3 counts of violating federal money laundering statutes, 18 U. S. C. §§ 1956(a)(1)(B)(i), 1957. See App. 13-24. A jury convicted O’Hagan on all 57 counts, and he was sentenced to a 41-month term of imprisonment.

A divided panel of the Court of Appeals for the Eighth Circuit reversed all of O’Hagan’s convictions. 92 F. 3d 612 (1996). Liability under § 10(b) and Rule 10b-5, the Eighth Circuit held, may not be grounded on the “misappropriation theory” of securities fraud on which the prosecution relied. Id., at 622. The Court of Appeals also held that Rule 14e-3(a) — which prohibits trading while in possession of material, nonpublic information relating to a tender offer — exceeds the SEC’s § 14(e) rulemaking authority because the Rule contains no breach of fiduciary duty requirement. Id., at 627. The Eighth Circuit further concluded that O’Hagan’s mail fraud and money laundering convictions rested on violations of the securities laws, and therefore could not stand once the securities fraud convictions were reversed. Id., at 627-628. Judge Fagg, dissenting, stated that he would recognize and enforce the misappropriation theory, and would hold that the SEC did not exceed its rulemaking authority when it adopted Rule 14e-3(a) without requiring proof of a breach of fiduciary duty. Id., at 628.

Decisions of the Courts of Appeals are in conflict on the propriety of the misappropriation theory under § 10(b) and Rule 10b-5, see infra this page and 650, and n. 3, and on the legitimacy of Rule 14e-3(a) under § 14(e), see infra, at 669-670. We granted certiorari, 519 U. S. 1087 (1997), and now reverse the Eighth Circuit’s judgment.

II

We address first the Court of Appeals reversal of 0 Ha-gan’s convictions under § 10(b) and Rule 10b-5. Following *650the Fourth Circuit’s lead, see United States v. Bryan, 58 F. 3d 933, 943-959 (1995), the Eighth Circuit rejected the misappropriation theory as a basis for § 10(b) liability. We hold, in accord with several other Courts of Appeals,3 that criminal liability under § 10(b) may be predicated on the misappropriation theory.4

A

In pertinent part, § 10(b) of the Exchange Act provides:

“It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—

“(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.” 15 U. S. C. § 78j(b).

*651The statute thus proscribes (1) using any deceptive device (2) in connection with the purchase or sale of securities, in contravention of rules prescribed by the Commission. The provision, as written, does not confine its coverage to deception of a purchaser or seller of securities, see United States v. Newman, 664 F. 2d 12, 17 (CA2 1981); rather, the statute reaches any deceptive device used “in connection with the purchase or sale of any security.”

Pursuant to its § 10(b) rulemaking authority, the Commission has adopted Rule 10b-5, which, as relevant here, provides:

“It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

“(a) To employ any device, scheme, or artifice to defraud, [or]

“(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

“in connection with the purchase or sale of any security.” 17 CFR §240.10b-5 (1996).

Liability under Rule 10b-5, our precedent indicates, does not extend beyond conduct encompassed by § 10(b)’s prohibition. See Ernst & Ernst v. Hochfelder, 425 U. S. 185, 214 (1976) (scope of Rule 10b-5 cannot exceed power Congress granted Commission under § 10(b)); see also Central Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A., 511 U. S. 164, 173 (1994) (“We have refused to allow [private] 10b-5 challenges to conduct not prohibited by the text of the statute.”).

Under the “traditional” or “classical theory” of insider trading liability, § 10(b) and Rule 10b-5 are violated when a corporate insider trades in the securities of his corporation *652on the basis of material, nonpublic information. Trading on such information qualifies as a “deceptive device” under § 10(b), we have affirmed, because “a relationship of trust and confidence [exists] between the shareholders of a corporation and those insiders who have obtained confidential information by reason of their position with that corporation.” Chiarella v. United States, 445 U. S. 222, 228 (1980). That relationship, we recognized, “gives rise to a duty to disclose [or to abstain from trading] because of the ‘necessity of preventing a corporate insider from . . . tak[ing] unfair advantage of. . . uninformed . . . stockholders.’” Id., at 228-229 (citation omitted). The classical theory applies not only to officers, directors, and other permanent insiders of a corporation, but also to attorneys, accountants, consultants, and others who temporarily become fiduciaries of a corporation. See Dirks v. SEC, 463 U. S. 646, 655, n. 14 (1983).

The “misappropriation theory” holds that a person commits fraud “in connection with” a securities transaction, and thereby violates § 10(b) and Rule 10b-5, when he misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information. See Brief for United States 14. Under this theory, a fiduciary’s undisclosed, self-serving use of a principal’s information to purchase or sell securities, in breach of a duty of loyalty and confidentiality, defrauds the principal of the exclusive use of that information. In lieu of premising liability on a fiduciary relationship between company insider and purchaser or seller of the company’s stock, the misappropriation theory premises liability on a fiduciary-turned-trader’s deception of those who entrusted him with access to confidential information.

The two theories are complementary, each addressing efforts to capitalize on nonpublic information through the purchase or sale of securities. The classical theory targets a corporate insider’s breach of duty to shareholders with whom the insider transacts; the misappropriation theory outlaws *653trading on the basis of nonpublic information by a corporate “outsider” in breach of a duty owed not to a trading party, but to the source of the information. The misappropriation theory is thus designed to “protec[t] the integrity of the securities markets against abuses by 'outsiders’ to a corporation who have access to confidential information that will affect th[e] corporation’s security price when revealed, but who owe no fiduciary or other duty to that corporation’s shareholders.” Ibid.

In this case, the indictment alleged that O’Hagan, in breach of a duty of trust and confidence he owed to his law firm, Dorsey & Whitney, and to its client, Grand Met, traded on the basis of nonpublic information regarding Grand Met’s planned tender offer for Pillsbury common stock. App. 16. This conduct, the Government charged, constituted a fraudulent device in connection with the purchase and sale of securities.5

B

We agree with the Government that misappropriation, as just defined, satisfies §10(b)’s requirement that chargeable conduct involve a “deceptive device or contrivance” used “in connection with” the purchase or sale of securities. We observe, first, that misappropriators, as the Government describes them, deal in deception. A fiduciary who “[pretends] loyalty to the principal while secretly converting the principal’s information for personal gain,” Brief for United States *65417, “dupes” or defrauds the principal. See Aldave, Misappropriation: A General Theory of Liability for Trading on Nonpublic Information, 13 Hofstra L. Rev. 101, 119 (1984).

We addressed fraud of the same species in Carpenter v. United States, 484 U. S. 19 (1987), which involved the mail fraud statute’s proscription of “any scheme or artifice to defraud,” 18 U. S. C. § 1341. Affirming convictions under that statute, we said in Carpenter that an employee’s undertaking not to reveal his employer’s confidential information “became a sham” when the employee provided the information to his co-conspirators in a scheme to obtain trading profits. 484 U. S., at 27. A company’s confidential information, we recognized in Carpenter, qualifies as property to which the company has a right of exclusive use. Id., at 25-27. The undisclosed misappropriation of such information, in violation of a fiduciary duty, the Court said in Carpenter, constitutes fraud akin to embezzlement — “‘the fraudulent appropriation to one’s own use of the money or goods entrusted to one’s care by another.’ ” Id., at 27 (quoting Grin v. Shine, 187 U. S. 181, 189 (1902)); see Aldave, 13 Hofstra L. Rev., at 119. Carpenter’s discussion of the fraudulent misuse of confidential information, the Government notes, “is a particularly apt source of guidance here, because [the mail fraud statute] (like Section 10(b)) has long been held to require deception, not merely the breach of a fiduciary duty.” Brief for United States 18, n. 9 (citation omitted).

Deception through nondisclosure is central to the theory of liability for which the Government seeks recognition. As counsel for the Government stated in explanation of the theory at oral argument: “To satisfy the common law rule that a trustee may not use the property that [has] been entrusted [to] him, there would have to be consent. To satisfy the requirement of the Securities Act that there be no deception, there would only have to be disclosure.” Tr. of Oral Arg. 12; see generally Restatement (Second) of Agency §§ 390, 395 *655(1958) (agent’s disclosure obligation regarding use of confidential information).6

The misappropriation theory advanced by the Government is consistent with Santa Fe Industries, Inc. v. Green, 430 U. S. 462 (1977), a decision underscoring that § 10(b) is not an all-purpose breach of fiduciary duty ban; rather, it trains on conduct involving manipulation or deception. See id., at 473-476. In contrast to the Government’s allegations in this case, in Santa Fe Industries, all pertinent facts were disclosed by the persons charged with violating § 10(b) and Rule 10b-5, see id., at 474; therefore, there was no deception through nondisclosure to which liability under those provisions could attach, see id., at 476. Similarly, full disclosure forecloses liability under the misappropriation theory: Because the deception essential to the misappropriation theory involves feigning fidelity to the source of information, if the fiduciary discloses to the source that he plans to trade on the nonpublic information, there is no “deceptive device” and thus no § 10(b) violation — although the fiduciary-turned-trader may remain liable under state law for breach of a duty of loyalty.7

We turn next to the § 10(b) requirement that the misappro-priator’s deceptive use of information be “in connection with *656the purchase or sale of [a] security.” This element is satisfied because the fiduciary’s fraud is consummated, not when the fiduciary gains the confidential information, but when, without disclosure to his principal, he uses the information to purchase or sell securities. The securities transaction and the breach of duty thus coincide. This is so even though the person or entity defrauded is not the other party to the trade, but is, instead, the source of the nonpublic information. See Aldave, 13 Hofstra L. Rev., at 120 (“a fraud or deceit can be practiced on one person, with resultant harm to another person or group of persons”). A misappropriator who trades on the basis of material, nonpublic information, in short, gains his advantageous market position through deception; he deceives the source of the information and simultaneously harms members of the investing public. See id., at 120-121, and n. 107.

The misappropriation theory targets information of a sort that misappropriators ordinarily capitalize upon to gain no-risk profits through the purchase or sale of securities. Should a misappropriator put such information to other use, the statute’s prohibition would not be implicated. The theory does not catch all conceivable forms of fraud involving confidential information; rather, it catches fraudulent means of capitalizing on such information through securities transactions.

The Government notes another limitation on the forms of fraud § 10(b) reaches: “The misappropriation theory would not. . . apply to a case in which a person defrauded a bank into giving him a loan or embezzled cash from another, and then used the proceeds of the misdeed to purchase securities.” Brief for United States 24, n. 13. In such a case, the Government states, “the proceeds would have value to the malefactor apart from their use in a securities transaction, and the fraud would be complete as soon as the money was obtained.” Ibid. In other words, money can buy, if not anything, then at least many things; its misappropriation *657may thus be viewed as sufficiently detached from a subsequent securities transaction that § 10(b)’s "in connection with” requirement would not be met. Ibid.

Justice Thomas’ charge that the misappropriation theory is incoherent because information, like funds, can be put to multiple uses, see post, at 681-686 (opinion concurring in judgment in part and dissenting in part), misses the point. The Exchange Act was enacted in part “to insure the maintenance of fair and honest markets,” 15 U. S. C. § 78b, and there is no question that fraudulent uses of confidential information fall within § 10(b)’s prohibition if the fraud is “in connection with” a securities transaction. It is hardly remarkable that a rule suitably applied to the fraudulent uses of certain kinds of information would be stretched beyond reason were it applied to the fraudulent use of money.

Justice Thomas does catch the Government in overstatement. Observing that money can be used for all manner of purposes and purchases, the Government urges that confidential information of the kind at issue derives its value only from its utility in securities trading. See Brief for United States 10, 21; post, at 683-684 (several times emphasizing the word “only”). Substitute “ordinarily” for “only,” and the Government is on the mark.8

*658Our recognition that the Government’s “only” is an overstatement has provoked the dissent to cry “new theory.” See post, at 687-689. But the very case on which Justice Thomas relies, Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U. S. 29 (1983), shows the extremity of that charge. In State Farm, we reviewed an agency’s rescission of a rule under the same “arbitrary and capricious” standard by which the promulgation of a rule under the relevant statute was to be judged, see id., at 41-42; in our decision concluding that the agency had not adequately explained its regulatory action, see id., at 57, we cautioned that a “reviewing court should not attempt itself to make up for such deficiencies,” id., at 43. Here, by contrast, Rule 10b-5’s promulgation has not been challenged; we consider only the Government’s charge that O’Hagan’s alleged fraudulent conduct falls within the prohibitions of the Rule and § 10(b). In this context, we acknowledge simply that, in defending the Government’s interpretation of the Rule and statute in this Court, the Government’s lawyers have pressed a solid point too far, something lawyers, occasionally even judges, are wont to do.

The misappropriation theory comports with § 10(b)’s language, which requires deception “in connection with the purchase or sale of any security,” not deception of an identifiable purchaser or seller. The theory is also well tuned to an animating purpose of the Exchange Act: to insure honest securities markets and thereby promote investor confidence. See 45 Fed. Reg. 60412 (1980) (trading on misappropriated information “undermines the integrity of, and investor confidence in, the securities markets”). Although informational disparity is inevitable in the securities markets, investors likely would hesitate to venture their capital in a market where trading based on misappropriated nonpublic information is unchecked by law. An investor’s informational disadvantage vis-á-vis a misappropriator with material, nonpublic in*659formation stems from contrivance, not luck; it is a disadvantage that cannot be overcome with research or skill. See Brudney, Insiders, Outsiders, and Informational Advantages Under the Federal Securities Laws, 93 Harv. L. Rev. 322, 356 (1979) (“If the market is thought to be systematically populated with . . . transactors [trading on the basis of misappropriated information] some investors will refrain from dealing altogether, and others will incur costs to avoid dealing with such transactors or corruptly to overcome their unerodable informational advantages.”); Aldave, 13 Hofstra L. Rev., at 122-123.

In sum, considering the inhibiting impact on market participation of trading on misappropriated information, and the congressional purposes underlying § 10(b), it makes scant sense to hold a lawyer 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 law firm representing the bidder. The text of the statute requires no such result.9 The misappropriation at issue here was properly made the subject of a.§ 10(b) charge because it meets the statutory requirement that there be “deceptive” conduct “in connection with” securities transactions.

*660c

The Court of Appeals rejected the misappropriation theory primarily on two grounds. First, as the Eighth Circuit comprehended the theory, it requires neither misrepresentation nor nondisclosure. See 92 F. 3d, at 618. As we just explained, however, see supra, at 654-665, deceptive nondisclosure is essential to the § 10(b) liability at issue. Concretely, in this case, “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 ma[de] his conduct ‘deceptive’ within the meaning of [§]10(b).” Reply Brief 7.

Second and “more obvious,” the Court of Appeals said, the misappropriation theory is not moored to § 10(b)’s requirement that “the fraud be ‘in connection with the purchase or sale of any security.’” 92 F. 3d, at 618 (quoting 15 U. S. C. § 78j(b)). According to the Eighth Circuit, three of our decisions reveal that § 10(b) liability cannot be predicated on a duty owed to the source of nonpublic information: Chiarella v. United States, 445 U. S. 222 (1980); Dirks v. SEC, 463 U. S. 646 (1983); and Central Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A, 511 U. S. 164 (1994). “[Ojnly a breach of a duty to parties to the securities transaction,” the Court of Appeals concluded, “or, at the most, to other market participants such as investors, will be sufficient to give rise to § 10(b) liability.” 92 F. 3d, at 618. We read the statute and our precedent differently, and note again that § 10(b) refers to “the purchase or sale of any security,” not.to identifiable purchasers or sellers of securities.

Chiarella involved securities trades by a printer employed at a shop that printed documents announcing corporate takeover bids. See 445 U. S., at 224. Deducing the names of target companies from documents he handled, the printer bought shares of the targets before takeover bids were announced, expecting (correctly) that the share prices would rise upon announcement. In these transactions, the printer did not disclose to the sellers of the securities (the target *661companies’ shareholders) the nonpublic information on which he traded. See ibid. For that trading, the printer was convicted of violating § 10(b) and Rule 10b-5. We reversed the Court of Appeals judgment that had affirmed the conviction. See id., at 225.

The jury in Chiarella had been instructed that it could convict the defendant if he willfully failed to inform sellers of target company securities that he knew of a takeover bid that would increase the value of their shares. See id., at 226. Emphasizing that the printer had no agency or other fiduciary relationship with the sellers, we held that liability could not be imposed on so broad a theory. See id., at 235. There is under § 10(b), we explained, no “general duty between all participants in market transactions to forgo actions based on material, nonpublic information.” Id., at 233. Under established doctrine, we said, a duty to disclose or abstain from trading “arises from a specific relationship between two parties.” Ibid.

The Court did not hold in Chiarella that the only relationship prompting liability for trading on undisclosed information is the relationship between a corporation’s insiders and shareholders. That is evident from our response to the Government’s argument before this Court that the printer’s misappropriation of information from his employer for purposes of securities trading — in violation of a duty of confidentiality owed to the acquiring companies — constituted fraud in connection with the purchase or sale of a security, and thereby satisfied the terms of § 10(b). Id., at 235-236. The Court declined to reach that potential basis for the printer’s liability, because the theory had not been submitted to the jury. See id., at 236-237. But four Justices found merit in it. See id., at 239 (Brennan, J., concurring in judgment); id., at 240-243 (Burger, C. J., dissenting); id., at 245 (Blackmun, J., joined by Marshall, J., dissenting). And a fifth Justice stated that the Court “wisely le[ft] the resolution of this issue for another day.” Id., at 238 (Stevens, J., concurring). *662 Chiarella thus expressly left open the misappropriation theory before us today. Certain statements in Chiarella, however, led the Eighth Circuit in the instant case to conclude that § 10(b) liability hinges exclusively on a breach of duty owed to a purchaser or seller of securities. See 92 F. 3d, at 618. The Court said in Chiarella that § 10(b) liability “is premised upon a duty to disclose arising from a relationship of trust and confidence between parties to a transac- . tion,” 445 U. S., at 230 (emphasis added), and observed that the printshop employee defendant in that case “was not a person in whom the sellers had placed their trust and confidence,” see id., at 232. These statements rejected the notion that § 10(b) stretches so far as to impose “a general duty between all participants in market transactions to forgo actions based on material, nonpublic information,” id., at 233, and we confine them to that context. The statements highlighted by the Eighth Circuit, in short, appear in an opinion carefully leaving for future resolution the validity of the misappropriation theory, and therefore cannot be read to foreclose that theory.

Dirks, too, left room for application of the misappropriation theory in cases like the one we confront.10 Dirks involved an investment analyst who had received information from a former insider of a corporation with which the analyst had no connection. See 463 U. S., at 648-649. The information indicated that the corporation had engaged in a massive fraud. The analyst investigated the fraud, obtaining corroborating information from employees of the corporation. During his investigation, the analyst discussed his findings with clients and investors, some of whom sold their holdings in the company the analyst suspected of gross wrongdoing. See id., at 649.

*663The SEC censured the analyst for, inter alia, aiding and abetting § 10(b) and Rule 10b-5 violations by clients and investors who sold their holdings based on the nonpublic information the analyst passed on. See id., at 650-652. In the SEC’s view, the analyst, as a “tippee” of corporation insiders, had a duty under § 10(b) and Rule 10b-5 to refrain from communicating the nonpublic information to persons likely to trade on the basis of it. See id., at 651, 655-656. This Court found no such obligation, see id., at 665-667, and repeated the key point made in Chiarella: There is no “ ‘general duty between all participants in market transactions to forgo actions based on material, nonpublic information.’” 463 U. S., at 655 (quoting Chiarella, 445 U. S., at 233); see Aldave, 13 Hofstra L. Rev., at 122 (misappropriation theory bars only “trading on the basis of information that the wrongdoer converted to his own use in violation of some fiduciary, contractual, or similar obligation to the owner or rightful possessor of the information”).

No showing had been made in Dirks that the “tippers” had violated any duty by disclosing to the analyst nonpublic information about their former employer. The insiders had acted not for personal profit, but to expose a massive fraud within the corporation. See 463 U. S., at 666-667. Absent any violation by the tippers, there could be no derivative liability for the tippee. See id., at 667. Most important for purposes of the instant case, the Court observed in Dirks: “There was no expectation by [the analyst’s] sources that he would keep their information in confidence. Nor did [the analyst] misappropriate or illegally obtain the information . . . .” Id., at 665. Dirks thus presents no suggestion that a person who gains nonpublic information through misappropriation in breach of a fiduciary duty escapes § 10(b) liability when, without alerting the source, he trades on the information.

Last of the three cases the Eighth Circuit regarded as warranting disapproval of the misappropriation theory, Cen *664 tral Bank held that “a private plaintiff may not maintain an aiding and abetting suit under § 10(b).” 511 U. S., at 191. We immediately cautioned in Central Bank that secondary actors in the securities markets may sometimes be chargeable under the securities Acts: “Any person or entity, including a lawyer, accountant, or bank, who employs a manipulative device or makes a material misstatement (or omission) on which a purchaser or seller of securities relies may be liable as a primary violator under 10b—5, assuming . . . the requirements for primary liability under Rule 10b-5 are met.” Ibid. (emphasis added). The Eighth Circuit isolated the statement just quoted and drew from it the conclusion that § 10(b) covers only deceptive statements or omissions on which purchasers and sellers, and perhaps other market participants, rely. See 92 F. 3d, at 619. It is evident from the question presented in Central Bank, however, that this Court, in the quoted passage, sought only to clarify that secondary actors, although not subject to aiding and abetting liability, remain subject to primary liability under § 10(b) and Rule 10b-5 for certain conduct.

Furthermore, Central Bank’s discussion concerned only private civil litigation under § 10(b) and Rule 10b-5, not-criminal liability. Central Bank’s reference to purchasers or sellers of securities must be read in light of a longstanding limitation on private § 10(b) suits. In Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723 (1975), we held that only actual purchasers or sellers of securities may maintain a private civil action under § 10(b) and Rule 10b-5. We so confined the § 10(b) private right of action because of “policy considerations.” Id., at 737. In particular, Blue Chip Stamps recognized the abuse potential and proof problems inherent in suits by investors who neither bought nor sold, but asserted they would have traded absent fraudulent conduct by others. See id., at 739-747; see also Holmes v. Securities Investor Protection Corporation, 503 U. S. 258, 285 *665(1992) (O’Connor, J., concurring in part and concurring in judgment); id., at 289-290 (Scalia, J., concurring in judgment). Criminal prosecutions do not present the dangers the Court addressed in Blue Chip Stamps, so that decision is “inapplicable” to indictments for violations of § 10(b) and Rule 10b-5. United States v. Naftalin, 441 U. S. 768, 774, n. 6 (1979); see also Holmes, 503 U. S., at 281 (O’Connor, J., concurring in part and concurring in judgment) (“[T]he purchaser/seller standing requirement for private civil actions under § 10(b) and Rule 10b-5 is of no import in criminal prosecutions for willful violations of those provisions.”).

In sum, the misappropriation theory, as we have examined and explained it in this opinion, is both consistent with the statute and with our precedent.11 Vital to our decision that criminal liability may be sustained under the misappropriation theory, we emphasize, are two sturdy safeguards Congress has provided regarding scienter. To establish a criminal violation of Rule 10b-5, the Government must prove that a person “willfully” violated the provision. See 15 U. S. C. *666§78ff(a).12 Furthermore, a defendant may not be imprisoned for violating Rule 10b-5 if he proves that he had no knowledge of the Rule. See ibid. 13 O’Hagan’s charge that the misappropriation theory is too indefinite to permit the imposition of criminal liability, see Brief for Respondent 30-33, thus fails not only because the theory is limited to those who breach a recognized duty. In addition, the statute’s “requirement of the presence of culpable intent as a necessary element of the offense does much to destroy any force in the argument that application of the [statute]” in circumstances such as O’Hagan’s is unjust. Boyce Motor Lines, Inc. v. United States, 342 U. S. 337, 342 (1952).

The Eighth Circuit erred in holding that the misappropriation theory is inconsistent with § 10(b). The Court of Appeals may address on remand O’Hagan’s other challenges to his convictions under § 10(b) and Rule 10b-5.

H-H HH HH

We consider next the ground on which the Court of Appeals reversed O’Hagan’s convictions for fraudulent trading in connection with a tender offer, in violation of § 14(e) of the Exchange Act and SEC Rule 14e-3(a). A sole question is before us as to these convictions: Did the Commission, as the Court of Appeals held, exceed its rulemaking authority under § 14(e) when it adopted Rule 14e-3(a) without requiring a showing that the trading at issue entailed a breach of *667fiduciary duty? We hold that the Commission, in this regard and to the extent relevant to this case, did not exceed its authority.

The governing statutory provision, § 14(e) of the Exchange Act, reads in relevant part:

“It shall be unlawful for any person ... to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer.... The [SEC] shall, for the purposes of this subsection, by rules and regulations define, and prescribe means reasonably designed to prevent, such acts and practices as are fraudulent, deceptive, or manipulative.” 15 U. S. C. §78n(e).

Section 14(e)’s first sentence prohibits fraudulent acts in connection with a tender offer. This self-operating proscription was one of several provisions added to the Exchange Act in 1968 by the Williams Act, 82 Stat. 454. The section’s second sentence delegates definitional and prophylactic rulemaking authority to the Commission. Congress added this rule-making delegation to § 14(e) in 1970 amendments to the Williams Act. See § 5, 84 Stat. 1497.

Through § 14(e) and other provisions on disclosure in the Williams Act,14 Congress sought to ensure that shareholders “confronted by a cash tender offer for their stock [would] not be required to respond without adequate information.” Rondeau v. Mosinee Paper Corp., 422 U. S. 49, 58 (1975); see Lewis v. McGraw, 619 F. 2d 192, 195 (CA2 1980) (per curiam) *668(“very purpose” of Williams Act was “informed decision-making by shareholders”). As we recognized in Schreiber v. Burlington Northern, Inc., 472 U. S. 1 (1985), Congress designed the Williams Act to make “disclosure, rather than court-imposed principles of ‘fairness’ or ‘artificiality,’ . . . the preferred method of market regulation.” Id., at 9, n. 8. Section 14(e), we explained, “supplements the more precise disclosure provisions found elsewhere in the Williams Act, while requiring disclosure more explicitly addressed to the tender offer context than that required by § 10(b).” Id., at 10-11.

Relying on § 14(e)’s rulemaking authorization, the Commission, in 1980, promulgated Rule 14e-3(a). That measure provides:

“(a) If any person has taken a substantial step or steps to commence, or has commenced, a tender offer (the ‘offering person’), it shall constitute a fraudulent, deceptive or manipulative act or practice within the meaning of section 14(e) of the [Exchange] Act for any other person who is in possession of material information relating to such tender offer which information he knows or has reason to know is nonpublic and which he knows or has reason to know has been acquired directly or indirectly from:

“(1) The offering person,

“(2) The issuer of the securities sought or to be sought by such tender offer, or

“(3) Any officer, director, partner or employee or any other person acting on behalf of the offering person or such issuer, to purchase or sell or cause to be purchased or sold any of such securities or any securities convertible into or exchangeable for any such securities or any option or right to obtain or to dispose of any of the foregoing securities, unless within a reasonable time prior to any purchase or sale such information and its source *669are publicly disclosed by press release or otherwise.” 17 CFR §240.14e-3(a) (1996).

As characterized by the Commission, Rule 14e-3(a) is a "disclose or abstain from trading” requirement. 45 Fed. Reg. 60410 (1980).15 The Second Circuit concisely described the Rule’s thrust:

“One violates Rule 14e-3(a) if he trades on the basis, of material nonpublic information concerning a pending tender offer that he knows or has reason to know has been acquired ‘directly or indirectly’ from an insider of the offeror or issuer, or someone working on their behalf. Rule 14e-3(a) is a disclosure provision. It creates a duty in those traders who fall within its ambit to abstain or disclose, without regard to whether the trader owes a pre-existing fiduciary duty to respect the confidentiality of the information.” United States v. Chestman, 947 F. 2d 551, 557 (1991) (en banc) (emphasis added), cert. denied, 503 U. S. 1004 (1992).

See also SEC v. Maio, 51 F. 3d 623, 635 (CA7 1995) (“Rule 14e-3 creates a duty to disclose material non-public information, or abstain from trading in stocks implicated by an impending tender offer, regardless of whether such information was obtained through a breach of fiduciary duty.” (emphasis added)); SEC v. Peters, 978 F. 2d 1162, 1165 (CA10 1992) (as written, Rule 14e-3(a) has no fiduciary duty requirement).

In the Eighth Circuit’s view, because Rule 14e-3(a) applies whether or not the trading in question breaches a fiduciary duty, the regulation exceeds the SEC’s § 14(e) rulemaking authority. See 92 F. 3d, at 624, 627. Contra, Maio, 51 F. 3d, at 634-635 (CA7); Peters, 978 F. 2d, at 1165-1167 (CA10); *670 Chestman, 947 F. 2d, at 556-563 (CA2) (all holding Rule 14e-3(a) a proper exercise of SEC’s statutory authority). In support of its holding, the Eighth Circuit relied on the text of § 14(e) and our decisions in Schreiber and Chiarella. See 92 F. 3d, at 624-627.

The Eighth Circuit homed in on the essence of §14(e)’s rulemaking authorization: “[T]he statute empowers the SEC to 'define* and ‘prescribe means reasonably designed to prevent’ ‘acts and practices’ which are ‘fraudulent.’” Id., at 624. All that means, the Eighth Circuit found plain, is that the SEC may “identify and regulate,” in the tender offer context, “acts and practices” the law already defines as “fraudulent”; but, the Eighth Circuit maintained, the SEC may not “create its own definition of fraud.” Ibid. (internal quotation marks omitted).

This Court, the Eighth Circuit pointed out, held in Schrei-ber that the word “manipulative” in the § 14(e) phrase “fraudulent, deceptive, or manipulative acts or practices” means just what the word means in § 10(b): Absent misrepresentation or nondisclosure, an act cannot be indicted as manipulative. See 92 F. 3d, at 625 (citing Schreiber, 472 U. S., at 7-8, and n. 6). Section 10(b) interpretations guide construction of § 14(e), the Eighth Circuit added, see 92 F. 3d, at 625, citing this Court’s acknowledgment in Schreiber that §14(e)’s “ ‘broad antifraud prohibition’ . . . [is] modeled on the anti-fraud provisions of § 10(b). .. and Rule 10b-5,” 472 U. S., at 10 (citation omitted); see id., at 10-11, n. 10.

For the meaning of “fraudulent” under § 10(b), the Eighth Circuit looked to Chiarella. See 92 F. 3d, at 625. In that case, the Eighth Circuit recounted, this Court held that a failure to disclose information could be “fraudulent” under § 10(b) only when there was a duty to speak arising out of “ ‘a fiduciary or other similar relation of trust and confidence.’ ” Chiarella, 445 U. S., at 228 (quoting Restatement (Second) of Torts § 551(2)(a) (1976)). Just as § 10(b) demands a showing *671of a breach of fiduciary duty, so such a breach is necessary to make out a § 14(e) violation, the Eighth Circuit concluded.

As to the Commission’s § 14(e) authority to “prescribe means reasonably designed to prevent” fraudulent acts, the Eighth Circuit stated: “Properly read, this provision means simply that the SEC has broad regulatory powers in the field of tender offers, but the statutory terms have a fixed meaning which the SEC cannot alter by way of an administrative rule.” 92 F. 3d, at 627.

The United States urges that the Eighth Circuit’s reading of § 14(e) misapprehends both the Commission’s authority to define fraudulent acts and the Commission’s power to prevent them. “The ‘defining’ power,” the United States submits, “would be a virtual nullity were the SEC not permitted to go beyond common law fraud (which is separately prohibited in the first [self-operative] sentence of Section 14(e)).” Brief for United States 11; see id., at 37.

In maintaining that the Commission’s power to define fraudulent acts under § 14(e) is broader than its rulemaking power under § 10(b), the United States questions the Court of Appeals’ reading of Schreiber. See Brief for United States 38-40. Parenthetically, the United States notes that the word before the Schreiber Court was “manipulative”; unlike “fraudulent,” the United States observes, “‘manipulative’ ... is ‘virtually a term of art when used in connection with the securities markets.’ ” Brief for United States 38, n. 20 (quoting Schreiber, 472 U. S., at 6). Most tellingly, the United States submits, Schreiber involved acts alleged to violate the self-operative provision in § 14(e)’s first sentence, a sentence containing language similar to § 10(b). But § 14(e)’s second sentence, containing the rulemaking authorization, the United States points out, does not track § 10(b), which simply authorizes the SEC to proscribe “manipulative or deceptive device[s] or contrivance[s].” Brief for United States 38. Instead, § 14(e)’s rulemaking prescription tracks § 15(c)(2)(D) of the Exchange Act, 15 U. S. C. § 78o(c)(2)(D), *672which concerns the conduct of broker-dealers in over-the-counter markets. See Brief for United States 38-39. Since 1938, see 52 Stat. 1075, § 15(c)(2) has given the Commission authority to “define, and prescribe means reasonably designed to prevent, such [broker-dealer] acts and practices as are fraudulent, deceptive, or manipulative.” 15 U. S. C. § 78o(c)(2)(D). When Congress added this same rulemaking language to § 14(e) in 1970, the Government states, the Commission had already used its § 15(c)(2) authority to reach beyond common-law fraud. See Brief for United States 39, n. 22.16

We need not resolve in this case whether the Commission’s authority under § 14(e) to “define . .. such acts and practices as are fraudulent” is broader than the Commission’s fraud-defining authority under § 10(b), for we agree with the United States that Rule 14e-3(a), as applied to cases of this genre, qualifies under § 14(e) as a “means reasonably designed to prevent” fraudulent trading on material, nonpublic information in the tender offer context.17 A prophylactic *673measure, because its mission is to prevent, typically encompasses more than the core activity prohibited. As we noted in Schreiber, § 14(e)’s rulemaking authorization gives the Commission “latitude,” even in the context of a term of art like “manipulative,” “to regulate nondeceptive activities as a 'reasonably designed’ means of preventing manipulative acts, without suggesting any change in the meaning of the term ‘manipulative’ itself.” 472 U. S., at 11, n. 11. We hold, accordingly, that under § 14(e), the Commission may prohibit acts not themselves fraudulent under the common law or § 10(b), if the prohibition is “reasonably designed to prevent . . . acts and practices [that] are fraudulent.” 15 U. S. C. § 78n(e).18

Because Congress has authorized the Commission, in § 14(e), to prescribe legislative rules, we owe the Commission’s judgment “more than mere deference or weight.” Batterton v. Francis, 432 U. S. 416, 424-426 (1977). Therefore, in determining whether Rule 14e-3(a)’s “disclose or abstain from trading” requirement is reasonably designed to prevent fraudulent acts, we must accord the Commission’s assessment “controlling weight unless [it is] arbitrary, capricious, or manifestly contrary to the statute.” Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, 844 (1984). In this case, we conclude, the Commission’s assessment is none of these.19

*674In 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 *675bankers, and accountants involved in structuring the transaction. The availability of that information may lead to abuse, for “even a hint of an upcoming tender offer may send the price of the target company’s stock soaring.” SEC v. Materia, 745 F. 2d 197, 199 (CA2 1984). Individuals entrusted with nonpublic information, particularly if they have no long-term loyalty to the issuer, may find the temptation to trade on that information hard to resist in view of “the very large short-term profits potentially available [to them].” Peters, 978 F. 2d, at 1167.

“[I]t may be possible to prove circumstantially that a person [traded on the basis of material, nonpublic information], but almost impossible to prove that the trader obtained such information in breach of a fiduciary duty owed either by the trader or by the ultimate insider source of the information.” Ibid. The example of a “tippee” who trades on information received from an insider illustrates the problem. Under Rule 10b-5, “a tippee assumes a fiduciary duty to the shareholders of a corporation not to trade on material nonpublic information only when the insider has breached his fiduciary duty to the shareholders by disclosing the information to the tippee and the tippee knows or should know that there has been a breach.” Dirks, 463 U. S., at 660. To show that a tippee who traded on nonpublic information about a tender offer had breached a fiduciary duty would require proof not only that the insider source breached a fiduciary duty, but that the tippee knew or should have known of that breach. “Yet, in most cases, the only parties to the [information transfer] will be the insider and the alleged tippee.” Peters, 978 F. 2d, at 1167.20

*676In sum, it is a fair assumption that trading on the basis of material, nonpublic'information will often involve a breach of a duty of confidentiality to the bidder or target company or their representatives. The SEC, cognizant of the proof problem that could enable sophisticated traders to escape responsibility, placed in Rule 14e-3(a) a “disclose or abstain from trading” command that does not require specific proof of a breach of fiduciary duty. That prescription, we are satisfied, applied to this case, is a “means reasonably designed to prevent” fraudulent trading on material, nonpublic information in the tender offer context. See Chestman, 947 F. 2d, at 560 (“While dispensing with the subtle problems of proof associated with demonstrating fiduciary breach in the problematic area of tender offer insider trading, [Rule 14e-3(a)] retains a close nexus between the prohibited conduct and the statutory aims.”); accord, Maio, 51 F. 3d, at 635, and n. 14; Peters, 978 F. 2d, at 1167.21 Therefore, insofar as it serves to prevent the type of misappropriation charged against O’Hagan, Rule 14e-3(a) is a proper exercise of the Commission’s prophylactic power under § 14(e).22

As an alternate ground for affirming the Eighth Circuit’s judgment, O’Hagan urges that Rule 14e-3(a) is invalid be*677cause it prohibits trading in advance of a tender offer — when “a substantial step ... to commence” such an offer has been taken — while § 14(e) prohibits fraudulent acts “in connection with any tender offer.” See Brief for Respondent 41-42. O’Hagan further contends that, by covering pre-offer conduct, Rule 14e-3(a) “fails to comport with due process on two levels”: The Rule does not “give fair notice as to when, in advance of a tender offer, a violation of § 14(e) occurs,” id., at 42; and it “disposes of any scienter requirement,” id., at 43. The Court of Appeals did not address these arguments, and O’Hagan did not raise the due process points in his briefs before that court. We decline to consider these contentions in the first instance.23 The Court of Appeals may address on remand any arguments O’Hagan has preserved.

HH

>

Based on its dispositions of the securities fraud convictions, the Court of Appeals also reversed O’Hagan’s convictions, under 18 U. S. C. § 1341, for mail fraud. See 92 F. 3d, at 627-628. Reversal of the securities convictions, the Court of Appeals recognized, “d[id] not as a matter of law require that the mail fraud convictions likewise be reversed.” Id., at 627 (citing Carpenter, 484 U. S., at 24, in which this Court unanimously affirmed mail and wire fraud convictions based on the same conduct that evenly divided the Court on the defendants’ securities fraud convictions). But in this case, the Court of Appeals said, the indictment was so structured that the mail fraud charges could not be disassociated from the securities fraud charges, and absent any securities *678fraud, “there was no fraud upon which to base the mail fraud charges.” 92 F. 3d, at 627-628.24

The United States urges that the Court of Appeals’ position is irreconcilable with Carpenter: Just as in Carpenter, so here, the “mail fraud charges are independent of [the] securities fraud charges, even [though] both rest on the same set of facts.” Brief for United States 46-47. We need not linger over this matter, for our rulings on the securities fraud issues require that we reverse the Court of Appeals judgment on the mail fraud counts as well.25

O’Hagan, we note, attacked the mail fraud convictions in the Court of Appeals on alternate grounds; his other arguments, not yet addressed by the Eighth Circuit, remain open for consideration on remand.

* * *

The judgment of the Court of Appeals for the Eighth Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

*679Justice Scalia,

concurring in part and dissenting in part.

I join Parts I, III, and IV of the Court’s opinion. I do not agree, however, with Part II of the Court’s opinion, containing its analysis of respondent’s convictions under § 10(b) and Rule 10b-5.

I do not entirely agree with Justice Thomas’s analysis of those convictions either, principally because it seems to me irrelevant whether the Government’s theory of why respondent’s acts were covered is “coherent and consistent,” post, at 691. It is true that with respect to matters over which an agency has been accorded adjudicative authority or policy-making discretion, the agency’s action must be supported by the reasons that the agency sets forth, SEC v. Chenery Corp., 318 U. S. 80, 94 (1943); see also SEC v. Chenery Corp., 332 U. S. 194, 196 (1947), but I do not think an agency’s unadorned application of the law need be, at least where (as here) no Chevron deference is being given to the agency’s interpretation, see Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984). In point of fact, respondent’s actions either violated § 10(b) and Rule 10b-5, or they did not — regardless of the reasons the Government gave. And it is for us to decide.

While the Court’s explanation of the scope of § 10(b) and Rule 10b-5 would be entirely reasonable in some other context, it does not seem to accord with the principle of lenity we apply to criminal statutes (which cannot be mitigated here by the Rule, which is no less ambiguous than the statute). See Reno v. Koray, 515 U. S. 50, 64-65 (1995) (explaining circumstances in which rule of lenity applies); United States v. Bass, 404 U. S. 336, 347-348 (1971) (discussing policies underlying rule of lenity). In light of that principle, it seems to me that the unelaborated statutory language: “[t]o use or employ, in connection with the purchase or sale of any security . . . any manipulative or deceptive device or contrivance,” § 10(b), must be construed to require the manipulation or deception of a party to a securities transaction.

*680Justice Thomas,

with whom The Chief Justice joins, concurring in the judgment in part and dissenting in part.

Today the majority upholds respondent’s convictions for violating § 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, based upon the Securities and Exchange Commission’s “misappropriation theory.” Central to the majority’s holding is the need to interpret §10(b)’s requirement that a deceptive device be “use[d] or employed], in connection with the purchase or sale of any security.” 15 U. S. C. § 78j(b). Because the Commission’s misappropriation theory fails to provide a coherent and consistent interpretation of this essential requirement for liability under § 10(b), I dissent.

The majority also sustains respondent’s convictions under § 14(e) of the Securities Exchange Act, and Rule 14e-3(a) promulgated thereunder, regardless of whether respondent violated a fiduciary duty to anybody. I dissent too from that holding because, while § 14(e) does allow regulations prohibiting nonfraudulent acts as a prophylactic against certain fraudulent acts, neither the majority nor the Commission identifies any relevant underlying fraud against which Rule 14e-3(a) reasonably provides prophylaxis. With regard to respondent’s mail fraud convictions, however, I concur in the judgment of the Court.

I

I do not take issue with the majority’s determination that the undisclosed misappropriation of confidential information by a fiduciary can constitute a “deceptive device” within the meaning of § 10(b). Nondisclosure where there is a preexisting duty to disclose satisfies our definitions of fraud and deceit for purposes of the securities laws. See Chiarella v. United States, 445 U. S. 222, 230 (1980).

Unlike the majority, however, I cannot accept the Commission’s interpretation of when a deceptive device is “use[d]... in connection with” a securities transaction. Although the Commission and the majority at points seem to suggest that *681 any relation to a securities transaction satisfies the “in connection with” requirement of § 10(b), both ultimately reject such an overly expansive construction and require a more integral connection between the fraud and the securities transaction. The majority states, for example, that the misappropriation theory applies to undisclosed misappropriation of confidential information “for securities trading purposes,” ante, at 652, thus seeming to require a particular intent by the misappropriator in order to satisfy the “in connection with” language. See also ante, at 656 (the “misappropriation theory targets information of a sort that misap-propriators ordinarily capitalize upon to gain no-risk profits through the purchase or sale of securities” (emphasis added)); ante, at 656-657 (distinguishing embezzlement of money used to buy securities as lacking the requisite connection). The Commission goes further, and argues that the misappropriation theory satisfies the “in connection with” requirement because it “depends on an inherent connection between the deceptive conduct and the purchase or sale of a security.” Brief for United States 21 (emphasis added); see also ibid, (the “misappropriated information had personal value to respondent only because of its utility in securities trading” (emphasis added)).

The Commission’s construction of the relevant language in § 10(b), and the incoherence of that construction, become evident as the majority attempts to describe why the fraudulent theft of information falls under the Commission’s misappropriation theory, but the fraudulent theft of money does not. The majority correctly notes that confidential information “qualifies as property to which the company has a right of exclusive use.” Ante, at 654. It then observes that the “undisclosed misappropriation of such information, in violation of a fiduciary duty,.. . constitutes fraud akin to embezzlement — the fraudulent appropriation to one’s own use of the money or goods entrusted to one’s care by another.” *682 Ibid. (citations and internal quotation marks omitted).1 So far the majority’s analogy to embezzlement is well taken, and adequately demonstrates that undisclosed misappropriation can be a fraud on the source of the information.

What the embezzlement analogy does not do, however, is explain how the relevant fraud is “use[d] or employ[ed], in connection with” a securities transaction. And when the majority seeks to distinguish the embezzlement of funds from the embezzlement of information, it becomes clear that neither the Commission nor the majority has a coherent theory regarding § 10(b)’s “in connection with” requirement.

Turning first to why embezzlement of information supposedly meets the “in connection with” requirement, the majority asserts that the requirement

“is satisfied because the fiduciary’s fraud is consummated, not when the fiduciary gains the confidential information, but when, without disclosure to his principal, he uses the information to purchase or sell securities. The securities transaction and the breach of duty thus coincide.” Ante, at 656.

The majority later notes, with apparent approval, the Government’s contention that the embezzlement of funds used to purchase securities would not fall within the misappropriation theory. Ante, at 656-657 (citing Brief for United States 24, n. 13). The misappropriation of funds used for a securities transaction is not covered by its theory, the Government explains, because “the proceeds would have value to the malefactor apart from their use in a securities transaction, and the fraud would be complete ás soon as the money was *683obtained.” Brief for United States 24, n. 13; see ante, at 656 (quoting Government’s explanation).

Accepting the Government’s description of the scope of its own theory, it becomes plain that the majority’s explanation of how the misappropriation theory supposedly satisfies the “in connection with” requirement is incomplete. The touchstone required for an embezzlement to be “use[d] or employed], in connection with” a securities transaction is not merely that it “coincide” with, or be consummated by, the transaction, but that it is necessarily and only consummated by the transaction. Where the property being embezzled has value “apart from [its] use in a securities transaction”— even though it is in fact being used in a securities transaction — the Government contends that there is no violation under the misappropriation theory.

My understanding of the Government’s proffered theory of liability, and its construction of the “in connection with” requirement, is confirmed by the Government’s explanation during oral argument:

“[Court]: What if I appropriate some of my client’s money in order to buy stock?

“[Court]: Have I violated the securities laws?

“[Counsel]: I do not think that you have.

“[Court]: Why not? Isn’t that in connection with the purchase of securities] just as much as this one is?

“[Counsel]: It’s not just as much as this one is, because in this case it is the use of the information that enables the profits, pure and simple. There would be no opportunity to engage in profit—

“[Court]: Same here. I didn’t have the money. The only way I could buy this stock was to get the money.

“[Counsel]: The difference ... is that once you have the money you can do anything you want with it. In a sense, the fraud is complete at that point, and then you *684go on and you can use the money to finance any number of other activities, but the connection is far less close than in this case, where the only value of this information for personal profit for respondent was to take it and profit in the securities markets by trading on it.

“[Court]: So what you’re saying is, is in this case the misappropriation can only be of relevance, or is of substantial relevance, is with reference to the purchase of securities.

“[Counsel]: Exactly.

“[Court]: When you take the money out of the accounts you can go to the racetrack, or whatever.

“[Counsel]: That’s exactly right, and because of that difference, [there] can be no doubt that this kind of misappropriation of property is in connection with the purchase or sale of securities.

“Other kinds of misappropriation of property may or may not, but this is a unique form of fraud, unique to the securities markets, in fact, because the only way in which respondent could have profited through this information is by either trading on it or by tipping somebody else to enable their trades.” Tr. of Oral Arg. 16-19 (emphases added).

As the above exchange demonstrates, the relevant distinction is not that the misappropriated information was used for a securities transaction (the money example met that test), but rather that it could only be used for such a transaction. See also id., at 6-7 (Government contention that the misappropriation theory satisfies “the requisite connection between the fraud and the securities trading, because it is only in the trading that the fraud is consummated” (emphasis added)); id., at 8 (same).

The Government’s construction of the “in connection with” requirement — and its claim that such requirement precludes coverage of financial embezzlement — also demonstrates how *685the majority’s described distinction of financial embezzlement is incomplete. Although the majority claims that the fraud in a financial embezzlement case is complete as soon as the money is obtained, and before the securities transaction is consummated, that is not uniformly true, and thus cannot be the Government’s basis for claiming that such embezzlement does not violate the securities laws. It is not difficult to imagine an embezzlement of money that takes place via the mechanism of a securities transaction — for example where a broker is directed to purchase stock for a client and instead purchases such stock — using client funds — for his own account. The unauthorized (and presumably undisclosed) transaction is the very act that constitutes the embezzlement and the “securities transaction and the breach of duty thus coincide.” What presumably distinguishes monetary embezzlement for the Government is thus that it is not necessarily coincident with a securities transaction, not that it never lacks such a “connection.”

Once the Government’s construction of the misappropriation theory is accurately described and accepted — along with its implied construction of § 10(b)’s “in connection with” language — that theory should no longer cover cases, such as this one, involving fraud on the source of information where the source has no connection with the other participant in a securities transaction. It seems obvious that the undisclosed misappropriation of confidential information is not necessarily consummated by a securities transaction. In this case, for example, upon learning of Grand Met’s confidential takeover plans, O’Hagan could have done any number of things with the information: He could have sold it to a newspaper for publication, see id., at 36; he could have given or sold the information to Pillsbury itself, see id., at 37; or he could even have kept the information and used it solely for his personal amusement, perhaps in a fantasy stock trading game.

Any of these activities would have deprived Grand Met of its right to “exclusive use,” ante, at 654, of the information *686and, if undisclosed, would constitute “embezzlement” of Grand Met’s informational property. Under any theory of liability, however, these activities would not violate § 10(b) and, according to the Commission’s monetary embezzlement analogy, these possibilities are sufficient to preclude a violation under the misappropriation theory even where the informational property was used for securities trading. That O’Hagan actually did use the information to purchase securities is thus no more significant here than it is in the case of embezzling money used to purchase securities. In both cases the embezzler could have done something else with the property, and hence the Commission’s necessary “connection” under the securities laws would not be met.2 If the relevant test under the “in connection with” language is whether the fraudulent act is necessarily tied to a securities transaction, then the misappropriation of confidential information used to trade no more violates § 10(b) than does the misappropriation of funds used to trade. As the Commission concedes that the latter is not covered under its theory, I am at a loss to see how the same theory can coherently be applied to the former.3

*687The majority makes no attempt to defend the misappropriation theory as set forth by the Commission. Indeed, the majority implicitly concedes the indefensibility of the Commission’s theory by acknowledging that alternative uses of misappropriated information exist that do not violate the securities laws and then dismissing the Government’s repeated explanations of its misappropriation theory as mere “overstatement.” Ante, at 657. Having rejected the Government’s description of its theory, the majority then engages in the “imaginative” exercise of constructing its own misappropriation theory from whole cloth. Thus, we are told, if we merely “ [substitute ‘ordinarily’ for ‘only’ ” when describing the degree of connectedness between a misappropriation and a securities transaction, the Government would have a winner. Ibid. Presumably, the majority would similarly edit the Government’s brief to this Court to argue for only an “ordinary,” rather than an “inherent connection between the deceptive conduct and the purchase or sale of a security.” Brief for United States 21 (emphasis added).

I need not address the coherence, or lack thereof, of the majority’s new theory, for it suffers from a far greater, and dispositive, flaw: It is not the theory offered by the Commission. Indeed, as far as we know from the majority’s opinion, this new theory has never been proposed by the Commission, much less adopted by rule or otherwise. It is a fundamental proposition of law that this Court “may not supply a reasoned basis for the agency’s action that the agency itself has not given.” Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U. S. 29, 43 (1983). We do not even credit a “post hoc rationalization]” of counsel for the agency, id., at 50, so one is left to wonder how we could possibly rely on a post hoc rationaliza*688tion invented by this Court and never even presented by the Commission for our consideration.

Whether the majority’s new theory has merit, we cannot possibly tell on the record before us. There are no findings regarding the “ordinary” use of misappropriated information, much less regarding the “ordinary” use of other forms of embezzled property. The Commission has not opined on the scope of the new requirement that property must “ordinarily” be used for securities trading in order for its misappropriation to be “in connection with” a securities transaction. We simply do not know what would or would not be covered by such a requirement, and hence cannot evaluate whether the requirement embodies a consistent and coherent interpretation of the statute.4 Moreover, persons subject to *689this new theory, such as respondent here, surely could not and cannot regulate their behavior to comply with the new theory because, until today, the theory has never existed. In short, the majority’s new theory is simply not presented by this case, and cannot form the basis for upholding respondent’s convictions.

In upholding respondent’s convictions under the new and improved misappropriation theory, the majority also points to various policy considerations underlying the securities laws, such as maintaining fair and honest markets, promoting investor confidence, and protecting the integrity of the securities markets. Ante, at 657, 658-659. But the repeated reliance on such broad-sweeping legislative purposes reaches too far and is misleading in the context of the misappropriation theory. It reaches too far in that, regardless of the overarching purpose of the securities laws, it is not illegal to run afoul of the “purpose” of a statute, only its letter. The majority’s approach is misleading in this case because it glosses over the fact that the supposed threat to fair and honest markets, investor confidence, and market integrity comes not from the supposed fraud in this case, but from the mere fact that the information used by O’Hagan was nonpublic.

As the majority concedes, because “the deception essential to the misappropriation theory involves feigning fidelity to the source of information, if the fiduciary discloses to the source that he plans to trade on the nonpublic information, there is no ‘deceptive device’ and thus no § 10(b) violation.” Ante, at 655 (emphasis added). Indeed, were the source expressly to authorize its agents to trade on the confidential information — as a perk or bonus, perhaps — there would likewise be no § 10(b) violation.5 Yet in either case — disclosed *690misuse or authorized use — the hypothesized “inhibiting impact on market participation,” ante, at 659, would be identical to that from behavior violating the misappropriation theory: “Outsiders” would still be trading based on nonpublic information that the average investor has no hope of obtaining through his own diligence.6

The majority’s statement that a “misappropriator who trades on the basis of material, nonpublic information, in short, gains his advantageous market position through deception; he deceives the source of the information and simultaneously harms members of the investing public,” ante, at 656 (emphasis added), thus focuses on the wrong point. Even if it is true that trading on nonpublic information hurts the public, it is true whether or not there is any deception of the source of the information.7 Moreover, as *691we have repeatedly held, use of nonpublic information to trade is not itself a violation of § 10(b). E. g., Chiarella, 445 U. S., at 232-233. Rather, it is the use of fraud “in connection with” a securities transaction that is forbidden. Where the relevant element of fraud has no impact on the integrity of the subsequent transactions as distinct from the nonfraud-ulent element of using nonpublic information, one can reasonably question whether the fraud was used in connection with a securities transaction. And one can likewise question whether removing that aspect of fraud, though perhaps laudable, has anything to do with the confidence or integrity of the market.

The absence of a coherent and consistent misappropriation theory and, by necessary implication, a coherent and consistent application of the statutory “use or employ, in connection with” language, is particularly problematic in the context of this case. The Government claims a remarkable breadth to the delegation of authority in § 10(b), arguing that “the very aim of this section was to pick up unforeseen, cunning, deceptive devices that people might cleverly use in the securities markets.” Tr. of Oral Arg. 7. As the Court aptly queried, “[t]hat’s rather unusual, for a criminal statute to be that open-ended, isn’t it?” Ibid. Unusual indeed. Putting aside the dubious validity of an open-ended delegation to an independent agency to go forth and create regulations criminalizing “fraud,” in this case we do not even have a formal regulation embodying the agency’s misappropriation theory. Certainly Rule 10b-5 cannot be said to embody the theory— although it deviates from the statutory language by the addition of the words “any person,” it merely repeats, unchanged, § 10(b)’s “in connection with” language. Given that the validity of the misappropriation theory turns on the construc*692tion of that language in § 10(b), the regulatory language is singularly uninformative.8

Because we have no regulation squarely setting forth some version of the misappropriation theory as the Commission’s interpretation of the statutory language, we are left with little more than the Commission’s litigating position or the majority’s completely novel theory that is not even acknowledged, much less adopted, by the Commission. As we have noted before, such positions are not entitled to deference and, at most, get such weight as their persuasiveness warrants. Metropolitan Stevedore Co. v. Rambo, ante, at 138, n. 9, 140, n. 10. Yet I find wholly unpersuasive a litigating position by the Commission that, at best, embodies an inconsistent and incoherent interpretation of the relevant statutory language and that does not provide any predictable guidance as to what behavior contravenes the statute. That position is no better than an ad hoc interpretation of statutory language and in my view can provide no basis for liability.

II

I am also of the view that O’Hagan’s conviction for violating Rule 14e-3(a) cannot stand. Section 14(e) of the Exchange Act provides, in relevant part:

“It shall be unlawful for any person ... to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer .... The Commission shall, for the purposes of this subsection, by rules and regulations define, and prescribe means *693reasonably designed to prevent, such acts and practices as are fraudulent, deceptive, or manipulative.” 15 U. S. C. § 78n(e).

Pursuant to the rulemaking authority conferred by this section, the Commission has promulgated Rule 14e-3(a), which provides, in relevant part:

“(a) If any person has taken a substantial step or steps to commence, or has commenced, a tender offer (the ‘offering person’), it shall constitute a fraudulent, deceptive or manipulative act or practice within the meaning of section 14(e) of the [Securities Exchange] Act for any other person who is in possession of material information relating to such tender offer which information he knows or has reason to know is nonpublic and which he knows or has reason to know has been acquired directly or indirectly from:

“(1) The offering person,

“(2) The issuer of the securities sought or to be sought by such tender offer, or

“(3) [Any person acting on behalf of the offering person or such issuer], to purchase or sell [any such securities or various instruments related to such securities], unless within a reasonable time prior to any purchase or sale such information and its source are publicly disclosed by press release or otherwise.” 17 CFR § 240.14e-3(a) (1996).

As the majority acknowledges, Rule 14e-3(a) prohibits a broad range of behavior regardless of whether such behavior is fraudulent under our precedents. See ante, at 669 (Rule applies “ ‘without regard to whether the trader owes a preexisting fiduciary duty to respect the confidentiality of the information’” (emphasis deleted)) (quoting United States v. Chestman, 947 F. 2d 551, 557 (CA2 1991) (en banc), cert. denied, 503 U. S. 1004 (1992)).

*694The Commission offers two grounds in defense of Rule 14e-3(a). First, it argues that § 14(e) delegates to the Commission the authority to “define” fraud differently than that concept has been defined by this Court, and that Rule 14e-3(a) is a valid exercise of that “defining” power. Second, it argues that § 14(e) authorizes the Commission to “prescribe means reasonably designed to prevent” fraudulent acts, and that Rule 14e-3(a) is a prophylactic rule that may prohibit nonfraudulent acts as a means of preventing fraudulent acts that are difficult to detect or prove.

The majority declines to reach the Commission’s first justification, instead sustaining Rule 14e-3(a) on the ground that

“under § 14(e), the Commission may prohibit acts not themselves fraudulent under the common law or § 10(b), if the prohibition is ‘reasonably designed to prevent.. . acts and practices [that] are fraudulent.’” Ante, at 673 (quoting 15 U. S. C. § 78n(e)).

According to the majority, prohibiting trading on nonpublic information is necessary to prevent such supposedly hard-to-prove fraudulent acts and practices as trading on information obtained from the buyer in breach of a fiduciary duty, ante, at 675, and possibly “warehousing,” whereby the buyer tips allies prior to announcing the tender offer and encourages them to purchase the target company’s stock, ante, at 672-673, n. 17.9

I find neither of the Commission’s justifications for Rule 14e-3(a) acceptable in misappropriation cases. With regard to the Commission’s claim of authority to redefine the concept of fraud, I agree with the Eighth Circuit that the Commission misreads the relevant provision of § 14(e).

*695“Simply put, the enabling provision of § 14(e) permits the SEC to identify and regulate those ‘acts and practices’ which fall within the § 14(e) legal definition of ‘fraudulent,’ but it does not grant the SEC a license to redefine the term.” 92 F. 3d 612, 624 (1996).

This conclusion follows easily from our similar statement in Schreiber v. Burlington Northern, Inc., 472 U. S. 1, 11, n. 11 (1985), that § 14(e) gives the “Commission latitude to regulate nondeceptive activities as a ‘reasonably designed’ means of preventing manipulative acts, without suggesting any change in the meaning of the term ‘manipulative’ itself.”

Insofar as the Rule 14e-3(a) purports to “define” acts and practices that “are fraudulent,” it must be measured against our precedents interpreting the scope of fraud. The majority concedes, however, that Rule 14e-3(a) does not prohibit merely trading in connection with fraudulent nondisclosure, but rather it prohibits trading in connection with any nondisclosure, regardless of the presence of a pre-existing duty to disclose. Ante, at 669. The Rule thus exceeds the scope of the Commission’s authority to define such acts and practices as “are fraudulent.”10

*696Turning to the Commission’s second justification for Rule 14e-3(a), although I can agree with the majority that § 14(e) authorizes the Commission to prohibit nonfraudulent acts as a means reasonably designed to prevent fraudulent ones, I cannot agree that Rule 14e-3(a) satisfies this standard. As an initial matter, the Rule, on its face, does not purport to be an exercise of the Commission’s prophylactic power, but rather a redefinition of what “constitute[s] a fraudulent, deceptive, or manipulative act or practice within the meaning of § 14(e).” That Rule 14e-3(a) could have been “conceived and defended, alternatively, as definitional or preventive,” ante, at 674, n. 19, misses the point. We evaluate regulations not based on the myriad of explanations that could have been given by the relevant agency, but on those explanations and justifications that were, in fact, given. See State Farm, 463 U. S., at 43, 50. Rule 14e-3(a) may not be “[s]ensibly read” as an exercise of “preventive” authority, ante, at 674, n. 19; it can only be differently so read, contrary to its own terms.

Having already concluded that the Commission lacks the power to redefine fraud, the regulation cannot be sustained on its own reasoning. This would seem a complete answer to whether the Rule is valid because, while we might give deference to the Commission’s regúlatory constructions of § 14(e), the reasoning used by the regulation itself is in this instance contrary to law and we need give no deference to the Commission’s post hoc litigating justifications not reflected in the regulation.

Even on its own merits, the Commission’s prophylactic justification fails. In order to be a valid prophylactic regulation, Rule 14e-3(a) must be reasonably designed not merely to prevent any fraud, but to prevent persons from engaging in “fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer.” 15 U. S. C. § 78n(e) (emphasis added). Insofar as Rule 14e-3(a) is designed to prevent the type of misappropriation at issue in this case, such acts are not legitimate objects of prevention because *697the Commission’s misappropriation theory does not represent a coherent interpretation of the statutory “in connection with” requirement, as explained in Part I, supra. Even assuming that a person misappropriating information from the bidder commits fraud on the bidder, the Commission has provided no coherent or consistent explanation as to why such fraud is “in connection with” a tender offer, and thus the Commission may not seek to prevent indirectly conduct which it could not, under its current theory, prohibit directly.11

Finally, even further assuming that the Commission’s misappropriation theory is a valid basis for direct liability, I fail to see how Rule 14e-3(a)’s elimination of the requirement of a breach of fiduciary duty is “reasonably designed” to prevent the underlying “fraudulent” acts. The majority’s primary argument on this score is that in many cases “ ‘a breach of duty is likely but difficult to prove.’ ” Ante, at 674 (quoting Reply Brief for United States 16). Although the majority’s hypothetical difficulties involved in a tipper-tippee situation might have some merit in the context of “classical” insider trading, there is no reason to suspect similar difficulties in “misappropriation” cases. In such cases, Rule 14e-3(a) requires the Commission to prove that the defendant “knows or has reason to know” that the nonpublic information upon which trading occurred came from the bidder or an agent of the bidder. Once the source of the information has been identified, it should be a simple task to obtain proof of any breach of duty. After all, it is the bidder itself that was defrauded in misappropriation cases, and there is no rea*698son to suspect that the victim of the fraud would be reluctant to provide evidence against the perpetrator of the fraud.12 There being no particular difficulties in proving a breach of duty in such circumstances, a rule removing the requirement of such a breach cannot be said to be “reasonably designed” to prevent underlying violations of the misappropriation theory.

What Rule 14e-3(a) was in fact “designed” to do can be seen from the remainder of the majority’s discussion of the Rule. Quoting at length from the Commission’s explanation of the Rule in the Federal Register, the majority notes the Commission’s concern with “ ‘unfair disparities in market information and market disruption.’” Ante, at 674 (quoting 45 Fed. Reg. 60412 (1980)). In the Commission’s further explanation of Rule 14e-3(a)’s purpose — continuing the paragraph partially quoted by the majority — an example of the problem to be addressed is the so-called “stampede effect” *699based on leaks and rumors that may result from trading on material, nonpublic information. Id., at 60413. The majority also notes (but does not rely on) the Government’s contention that it would not be able to prohibit the supposedly problematic practice of “warehousing” — a bidder intentionally tipping allies to buy stock in advance of a bid announcement — if a breach of fiduciary duty were required. Ante, at 672-673, n. 17 (citing Reply Brief for United States 17). Given these policy concerns, the majority notes with seeming approval the Commission’s justification of Rule 14e-3(a) “as a means necessary and proper to assure the efficacy of Williams Act protections.” Ante, at 674.

Although this reasoning no doubt accurately reflects the Commission’s purposes in adopting Rule 14e-3(a), it does little to support the validity of that Rule as a means designed to prevent such behavior: None of the above-described acts involve breaches of fiduciary duties, hence a Rule designed to prevent them does not satisfy § 14(e)’s requirement that the Commission’s Rules promulgated under that section be “reasonably designed to prevent” acts and practices that “are fraudulent, deceptive, or manipulative.” As the majority itself recognizes, there is no “ ‘general duty between all participants in market transactions to forgo actions based on material, nonpublic information,’” and such duty only “‘arises from a specific relationship between two parties.’” Ante, at 661 (quoting Chiarella, 445 U. S., at 233). Unfair disparities in market information, and the potential “stampede effect” of leaks, do not necessarily involve a breach of any duty to anyone, and thus are not proper objects for regulation in the name of “fraud” under § 14(e). Likewise (as the Government concedes, Reply Brief for United States 17), “warehousing” is not fraudulent given that the tippees are using the information with the express knowledge and approval of the source of the information. There simply would be no deception in violation of a duty to disclose under such circumstances. Cf. ante, at 654-655 (noting Government’s conces*700sion that use of bidder’s information with bidder’s knowledge is not fraudulent under misappropriation theory).

While enhancing the overall efficacy of the Williams Act may be a reasonable goal, it is not one that may be pursued through § 14(e), which limits its grant of rulemaking authority to the prevention of fraud, deceit, and manipulation. As we have held in the context of § 10(b), “not every instance of financial unfairness constitutes fraudulent activity.” Chiarella, supra, at 232. Because, in the context of misappropriation cases, Rule 14e-3(a) is not a means “reasonably designed” to prevent persons from engaging in fraud “in connection with” a tender offer, it exceeds the Commission’s authority under § 14(e), and respondent’s conviction for violation of that Rule cannot be sustained.

III

With regard to respondent’s convictions on the mail fraud counts, my view is that they may be sustained regardless of whether respondent may be convicted of the securities fraud counts. Although the issue is highly fact bound, and not independently worthy of plenary consideration by this Court, we have nonetheless accepted the issue for review and therefore I will endeavor to resolve it.

As I read the indictment, it does not materially differ from the indictment in Carpenter v. United States, 484 U. S. 19 (1987). There, the Court was unanimous in upholding the mail fraud conviction, id., at 28, despite being evenly divided on the securities fraud counts, id., at 24. I do not think the wording of the indictment in the current case requires a finding of securities fraud in order to find mail fraud. Certainly the jury instructions do not make the mail fraud count dependent on the securities fraud counts. Rather, the counts were simply predicated on the same factual basis, and just because those facts are legally insufficient to constitute securities fraud does not make them legally insufficient *701to constitute mail fraud.13 I therefore concur in the judgment of the Court as it relates to respondent’s mail fraud convictions.

Justice ALITO delivered the opinion of the Court.

Section 10(b) of the Securities Exchange Act of 1934 and the Securities and Exchange Commission's Rule 10b-5 prohibit undisclosed trading on inside corporate information by individuals who are under a duty of trust and confidence that prohibits them from secretly using such information for their personal advantage. 48 Stat. 891, as amended, 15 U.S.C. § 78j(b) (prohibiting the use, "in connection with the purchase or sale of any security," of "any manipulative or deceptive device or contrivance in contravention of such rules as the [Securities and Exchange Commission] may prescribe"); 17 C.F.R. § 240.10b-5 (2016) (forbidding the use, "in connection with the sale or purchase of any security," of "any device, scheme or artifice to defraud," or any "act, practice, or course of business which operates ... as a fraud or deceit"); see United States v. O'Hagan, 521 U.S. 642, 650-652, 117 S.Ct. 2199, 138 L.Ed.2d 724 (1997). Individuals under this duty may face criminal and civil liability for trading on inside information (unless they make appropriate disclosures ahead of time).

These persons also may not tip inside information to others for trading. The tippee acquires the tipper's duty to disclose or abstain from trading if the tippee knows the information was disclosed in breach of the tipper's duty, and the tippee may commit securities fraud by trading in disregard of that knowledge. In Dirks v. SEC, 463 U.S. 646, 103 S.Ct. 3255, 77 L.Ed.2d 911 (1983), this Court explained that a tippee's liability for trading on inside information hinges on whether the tipper breached a fiduciary duty by disclosing the information. A tipper breaches such a fiduciary duty, we held, when the tipper discloses the inside information for a personal benefit. And, we went on to say, a jury can infer a personal benefit-and thus a breach of the tipper's duty-where the tipper receives something of value in exchange for the tip or "makes a gift of confidential information to a trading relative or friend." Id., at 664, 103 S.Ct. 3255.

Petitioner Bassam Salman challenges his convictions for conspiracy and insider trading. Salman received lucrative trading tips from an extended family member, who had received the information from *424Salman's brother-in-law. Salman then traded on the information. He argues that he cannot be held liable as a tippee because the tipper (his brother-in-law) did not personally receive money or property in exchange for the tips and thus did not personally benefit from them. The Court of Appeals disagreed, holding that Dirks allowed the jury to infer that the tipper here breached a duty because he made a " 'gift of confidential information to a trading relative.' " 792 F.3d 1087, 1092 (C.A.9 2015) (quoting Dirks, supra, at 664, 103 S.Ct. 3255 ). Because the Court of Appeals properly applied Dirks, we affirm the judgment below.

I

Maher Kara was an investment banker in Citigroup's healthcare investment banking group. He dealt with highly confidential information about mergers and acquisitions involving Citigroup's clients. Maher enjoyed a close relationship with his older brother, Mounir Kara (known as Michael). After Maher started at Citigroup, he began discussing aspects of his job with Michael. At first he relied on Michael's chemistry background to help him grasp scientific concepts relevant to his new job. Then, while their father was battling cancer, the brothers discussed companies that dealt with innovative cancer treatment and pain management techniques. Michael began to trade on the information Maher shared with him. At first, Maher was unaware of his brother's trading activity, but eventually he began to suspect that it was taking place.

Ultimately, Maher began to assist Michael's trading by sharing inside information with his brother about pending mergers and acquisitions. Maher sometimes used code words to communicate corporate information to his brother. Other times, he shared inside information about deals he was not working on in order to avoid detection. See, e.g., App. 118, 124-125. Without his younger brother's knowledge, Michael fed the information to others-including Salman, Michael's friend and Maher's brother-in-law. By the time the authorities caught on, Salman had made over $1.5 million in profits that he split with another relative who executed trades via a brokerage account on Salman's behalf.

Salman was indicted on one count of conspiracy to commit securities fraud, see 18 U.S.C. § 371, and four counts of securities fraud, see 15 U.S.C. §§ 78j(b), 78ff ; 18 U.S.C. § 2 ; 17 C.F.R. § 240.10b-5. Facing charges of their own, both Maher and Michael pleaded guilty and testified at Salman's trial.

The evidence at trial established that Maher and Michael enjoyed a "very close relationship." App. 215. Maher "love[d] [his] brother very much," Michael was like "a second father to Maher," and Michael was the best man at Maher's wedding to Salman's sister. Id ., at 158, 195, 104-107. Maher testified that he shared inside information with his brother to benefit him and with the expectation that his brother would trade on it. While Maher explained that he disclosed the information in large part to appease Michael (who pestered him incessantly for it), he also testified that he tipped his brother to "help him" and to "fulfil[l] whatever needs he had." Id ., at 118, 82. For instance, Michael once called Maher and told him that "he needed a favor." Id., at 124. Maher offered his brother money but Michael asked for information instead. Maher then disclosed an upcoming acquisition. Ibid. Although he instantly regretted the tip and called his brother back to implore him not to trade, Maher expected his brother to do so anyway. Id., at 125.

*425For his part, Michael told the jury that his brother's tips gave him "timely information that the average person does not have access to" and "access to stocks, options, and what have you, that I can capitalize on, that the average person would never have or dream of." Id., at 251. Michael testified that he became friends with Salman when Maher was courting Salman's sister and later began sharing Maher's tips with Salman. As he explained at trial, "any time a major deal came in, [Salman] was the first on my phone list." Id ., at 258. Michael also testified that he told Salman that the information was coming from Maher. See, e.g., id ., at 286 (" 'Maher is the source of all this information' ").

After a jury trial in the Northern District of California, Salman was convicted on all counts. He was sentenced to 36 months of imprisonment, three years of supervised release, and over $730,000 in restitution. After his motion for a new trial was denied, Salman appealed to the Ninth Circuit. While his appeal was pending, the Second Circuit issued its opinion in United States v. Newman, 773 F.3d 438 (2014), cert. denied, 577 U.S. ----, 136 S.Ct. 242, 193 L.Ed.2d 133 (2015). There, the Second Circuit reversed the convictions of two portfolio managers who traded on inside information. The Newman defendants were "several steps removed from the corporate insiders" and the court found that "there was no evidence that either was aware of the source of the inside information." 773 F.3d, at 443. The court acknowledged that Dirks and Second Circuit case law allow a factfinder to infer a personal benefit to the tipper from a gift of confidential information to a trading relative or friend. 773 F.3d, at 452. But the court concluded that, "[t]o the extent" Dirks permits "such an inference," the inference "is impermissible in the absence of proof of a meaningfully close personal relationship that generates an exchange that is objective, consequential, and represents at least a potential gain of a pecuniary or similarly valuable nature." 773 F.3d, at 452.1

Pointing to Newman, Salman argued that his conviction should be reversed. While the evidence established that Maher made a gift of trading information to Michael and that Salman knew it, there was no evidence that Maher received anything of "a pecuniary or similarly valuable nature" in exchange-or that Salman knew of any such benefit. The Ninth Circuit disagreed and affirmed Salman's conviction. 792 F.3d 1087. The court reasoned that the case was governed by Dirks 's holding that a tipper benefits personally by making a gift of confidential information to a trading relative or friend. Indeed, Maher's disclosures to Michael were "precisely the gift of confidential information to a trading relative that Dirks envisioned." 792 F.3d, at 1092 (internal quotation marks omitted). To the extent Newman went further and required additional gain to the tipper in cases involving gifts of confidential information to family and friends, the Ninth Circuit "decline [d] to follow it." 792 F.3d, at 1093.

We granted certiorari to resolve the tension between the Second Circuit's Newman decision and the Ninth Circuit's decision in this case.2 577 U.S. ----, 136 S.Ct. 899, 193 L.Ed.2d 788 (2016).

*426II

A

In this case, Salman contends that an insider's "gift of confidential information to a trading relative or friend," Dirks, 463 U.S., at 664, 103 S.Ct. 3255 is not enough to establish securities fraud. Instead, Salman argues, a tipper does not personally benefit unless the tipper's goal in disclosing inside information is to obtain money, property, or something of tangible value. He claims that our insider-trading precedents, and the cases those precedents cite, involve situations in which the insider exploited confidential information for the insider's own "tangible monetary profit." Brief for Petitioner 31. He suggests that his position is reinforced by our criminal-fraud precedents outside of the insider-trading context, because those cases confirm that a fraudster must personally obtain money or property. Id ., at 33-34. More broadly, Salman urges that defining a gift as a personal benefit renders the insider-trading offense indeterminate and overbroad: indeterminate, because liability may turn on facts such as the closeness of the relationship between tipper and tippee and the tipper's purpose for disclosure; and overbroad, because the Government may avoid having to prove a concrete personal benefit by simply arguing that the tipper meant to give a gift to the tippee. He also argues that we should interpret Dirks 's standard narrowly so as to avoid constitutional concerns. Brief for Petitioner 36-37. Finally, Salman contends that gift situations create especially troubling problems for remote tippees-that is, tippees who receive inside information from another tippee, rather than the tipper-who may have no knowledge of the relationship between the original tipper and tippee and thus may not know why the tipper made the disclosure. Id ., at 43, 48, 50.

The Government disagrees and argues that a gift of confidential information to anyone, not just a "trading relative or friend," is enough to prove securities fraud. See Brief for United States 27 ("Dirks 's personal-benefit test encompasses a gift to any person with the expectation that the information will be used for trading, not just to 'a trading relative or friend' " (quoting 463 U.S., at 664, 103 S.Ct. 3255 ; emphasis in original)). Under the Government's view, a tipper personally benefits whenever the tipper discloses confidential trading information for a noncorporate purpose. Accordingly, a gift to a friend, a family member, or anyone else would support the inference that the tipper exploited the trading value of inside information for personal purposes and thus personally benefited from the disclosure. The *427Government claims to find support for this reading in Dirks and the precedents on which Dirks relied. See, e.g., id., at 654, 103 S.Ct. 3255 ("fraud" in an insider-trading case "derives 'from the inherent unfairness involved where one takes advantage' of 'information intended to be available only for a corporate purpose and not for the personal benefit of anyone' " (quoting In re Merrill Lynch, Pierce, Fenner & Smith, Inc., 43 S.E.C. 933, 936 (1968) )).

The Government also argues that Salman's concerns about unlimited and indeterminate liability for remote tippees are significantly alleviated by other statutory elements that prosecutors must satisfy to convict a tippee for insider trading. The Government observes that, in order to establish a defendant's criminal liability as a tippee, it must prove beyond a reasonable doubt that the tipper expected that the information being disclosed would be used in securities trading. Brief for United States 23-24; Tr. of Oral Arg. 38. The Government also notes that, to establish a defendant's criminal liability as a tippee, it must prove that the tippee knew that the tipper breached a duty-in other words, that the tippee knew that the tipper disclosed the information for a personal benefit and that the tipper expected trading to ensue. Brief for United States 43; Tr. of Oral Arg. 36-37, 39.

B

We adhere to Dirks, which easily resolves the narrow issue presented here.

In Dirks, we explained that a tippee is exposed to liability for trading on inside information only if the tippee participates in a breach of the tipper's fiduciary duty. Whether the tipper breached that duty depends "in large part on the purpose of the disclosure" to the tippee. 463 U.S., at 662, 103 S.Ct. 3255. "[T]he test," we explained, "is whether the insider personally will benefit, directly or indirectly, from his disclosure." Ibid. Thus, the disclosure of confidential information without personal benefit is not enough. In determining whether a tipper derived a personal benefit, we instructed courts to "focus on objective criteria, i.e., whether the insider receives a direct or indirect personal benefit from the disclosure, such as a pecuniary gain or a reputational benefit that will translate into future earnings." Id., at 663, 103 S.Ct. 3255. This personal benefit can "often" be inferred "from objective facts and circumstances," we explained, such as "a relationship between the insider and the recipient that suggests a quid pro quo from the latter, or an intention to benefit the particular recipient." Id., at 664, 103 S.Ct. 3255. In particular, we held that "[t]he elements of fiduciary duty and exploitation of nonpublic information also exist when an insider makes a gift of confidential information to a trading relative or friend ." Ibid. (emphasis added). In such cases, "[t]he tip and trade resemble trading by the insider followed by a gift of the profits to the recipient." Ibid. We then applied this gift-giving principle to resolve Dirks itself, finding it dispositive that the tippers "received no monetary or personal benefit" from their tips to Dirks, "nor was their purpose to make a gift of valuable information to Dirks ." Id., at 667, 103 S.Ct. 3255 (emphasis added).

Our discussion of gift giving resolves this case. Maher, the tipper, provided inside information to a close relative, his brother Michael. Dirks makes clear that a tipper breaches a fiduciary duty by making a gift of confidential information to "a trading relative," and that rule is sufficient to resolve the case at hand. As Salman's counsel acknowledged at oral argument, Maher would have breached his duty had he personally traded on the information here himself then given the proceeds *428as a gift to his brother. Tr. of Oral Arg. 3-4. It is obvious that Maher would personally benefit in that situation. But Maher effectively achieved the same result by disclosing the information to Michael, and allowing him to trade on it. Dirks appropriately prohibits that approach, as well. Cf. 463 U.S., at 659, 103 S.Ct. 3255 (holding that "insiders [are] forbidden" both "from personally using undisclosed corporate information to their advantage" and from "giv[ing] such information to an outsider for the same improper purpose of exploiting the information for their personal gain"). Dirks specifies that when a tipper gives inside information to "a trading relative or friend," the jury can infer that the tipper meant to provide the equivalent of a cash gift. In such situations, the tipper benefits personally because giving a gift of trading information is the same thing as trading by the tipper followed by a gift of the proceeds. Here, by disclosing confidential information as a gift to his brother with the expectation that he would trade on it, Maher breached his duty of trust and confidence to Citigroup and its clients-a duty Salman acquired, and breached himself, by trading on the information with full knowledge that it had been improperly disclosed.

To the extent the Second Circuit held that the tipper must also receive something of a "pecuniary or similarly valuable nature" in exchange for a gift to family or friends, Newman, 773 F.3d, at 452, we agree with the Ninth Circuit that this requirement is inconsistent with Dirks .

C

Salman points out that many insider-trading cases-including several that Dirks cited-involved insiders who personally profited through the misuse of trading information. But this observation does not undermine the test Dirks articulated and applied. Salman also cites a sampling of our criminal-fraud decisions construing other federal fraud statutes, suggesting that they stand for the proposition that fraud is not consummated unless the defendant obtains money or property. Sekhar v. United States, 570 U.S. ----, 133 S.Ct. 2720, 186 L.Ed.2d 794 (2013) (Hobbs Act); Skilling v. United States, 561 U.S. 358, 130 S.Ct. 2896, 177 L.Ed.2d 619 (2010) (honest-services mail and wire fraud); Cleveland v. United States, 531 U.S. 12, 121 S.Ct. 365, 148 L.Ed.2d 221 (2000) (wire fraud); McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987) (mail fraud). Assuming that these cases are relevant to our construction of § 10(b) (a proposition the Government forcefully disputes), nothing in them undermines the commonsense point we made in Dirks. Making a gift of inside information to a relative like Michael is little different from trading on the information, obtaining the profits, and doling them out to the trading relative. The tipper benefits either way. The facts of this case illustrate the point: In one of their tipper-tippee interactions, Michael asked Maher for a favor, declined Maher's offer of money, and instead requested and received lucrative trading information.

We reject Salman's argument that Dirks 's gift-giving standard is unconstitutionally vague as applied to this case. Dirks created a simple and clear "guiding principle" for determining tippee liability, 463 U.S., at 664, 103 S.Ct. 3255 and Salman has not demonstrated that either § 10(b) itself or the Dirks gift-giving standard "leav[e] grave uncertainty about how to estimate the risk posed by a crime" or are plagued by "hopeless indeterminacy," Johnson v. United States, 576 U.S. ----, ----, ----, 135 S.Ct. 2551, 2557, 2558, 192 L.Ed.2d 569 (2015). At most, Salman shows that in some factual circumstances *429assessing liability for gift-giving will be difficult. That alone cannot render "shapeless" a federal criminal prohibition, for even clear rules "produce close cases." Id., at ----, ----, 135 S.Ct., at 2560. We also reject Salman's appeal to the rule of lenity, as he has shown "no grievous ambiguity or uncertainty that would trigger the rule's application." Barber v. Thomas, 560 U.S. 474, 492, 130 S.Ct. 2499, 177 L.Ed.2d 1 (2010) (internal quotation marks omitted). To the contrary, Salman's conduct is in the heartland of Dirks 's rule concerning gifts. It remains the case that "[d]etermining whether an insider personally benefits from a particular disclosure, a question of fact, will not always be easy for courts." 463 U.S., at 664, 103 S.Ct. 3255. But there is no need for us to address those difficult cases today, because this case involves "precisely the 'gift of confidential information to a trading relative' that Dirks envisioned." 792 F.3d, at 1092 (quoting 463 U.S., at 664, 103 S.Ct. 3255 ).

III

Salman's jury was properly instructed that a personal benefit includes "the benefit one would obtain from simply making a gift of confidential information to a trading relative." App. 398-399. As the Court of Appeals noted, "the Government presented direct evidence that the disclosure was intended as a gift of market-sensitive information." 792 F.3d, at 1094. And, as Salman conceded below, this evidence is sufficient to sustain his conviction under our reading of Dirks . Appellant's Supplemental Brief in No. 14-10204(CA9), p. 6 ("Maher made a gift of confidential information to a trading relative [Michael] ... and, if [Michael's] testimony is accepted as true (as it must be for purposes of sufficiency review), Salman knew that Maher had made such a gift" (internal quotation marks, brackets, and citation omitted)). Accordingly, the Ninth Circuit's judgment is affirmed.

It is so ordered.