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.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

This case raises questions of the scope of liability under the misappropriation theory of insider trading. Taking a different view from our able district court brother of the allegations of the complaint, we are persuaded that the case should not have been dismissed under Fed.R.Civ.P. 9(b) and 12 and must proceed to discovery.

Mark Cuban is a well known entrepreneur and current owner of the Dallas Mavericks and Landmark theaters, among other businesses. The SEC brought this suit against Cuban alleging he violated Section 17(a) of the Securities Act of 1933,1 Section 10(b) of the Securities Exchange Act of 1934,2 and Rule 10b-53 by trading in Mamma.com stock in breach of his duty to the CEO and Mamma.com — amounting to insider trading under the misappropriation theory of liability. The core allegation is that Cuban received confidential information from the CEO of Mamma.com, a Canadian search engine company in which Cuban was a large minority stakeholder, agreed to keep the information confidential, and acknowledged he could not trade on the information. The SEC alleges that, armed with the inside information regarding a private investment of public equity (PIPE) offering, Cuban sold his stake in the company in an effort to avoid losses from the inevitable fall in Mamma.com’s share price when the offering was announced.

Cuban moved to dismiss the action under Rule 9(b) and 12(b)(6). The district court found that, at most, the complaint alleged an agreement to keep the information confidential, but did not include an agreement not to trade. Finding a simple confidentiality agreement to be insufficient to create a duty to disclose or abstain from trading under the securities laws, the court granted Cuban’s motion to dismiss. The SEC appeals, arguing that a confidentiality *553agreement creates a duty to disclose or abstain and that, regardless, the confidentiality agreement alleged in the complaint also contained an agreement not to trade on the information and that agreement would create such a duty.

We review de novo the district court’s dismissal for failure to state a claim under Rule 12(b)(6).4 We accept “all well pleaded facts as true, viewing them in the light most favorable to the plaintiff.”5 The “ ‘complaint must contain sufficient factual matter’, accepted as true, to ‘state a claim to relief that is plausible on its face.’”6 “ ‘Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).’ ”7

The SEC alleges that Cuban’s trading constituted insider trading and violated Section 10(b) of the Securities Exchange Act.8 Section 10(b) makes it

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 ... [t]o use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.9

Pursuant to this section, the SEC promulgated Rule 10b-5, which makes it unlawful to

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

(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, 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.

The Supreme Court has interpreted section 10(b) to prohibit insider trading under two complementary theories, the “classical theory” and the “misappropriation theory.”10

The classical theory of insider trading prohibits a “corporate insider” from trading on material nonpublic information obtained from his position within the corporation without disclosing the information. According to this theory, there exists “a relationship of trust and confidence between the shareholders of a corporation *554and those insiders who have obtained confidential information by reason of their position with that corporation.”11 Trading on such confidential information qualifies as a “deceptive device” under section 10(b) because by using that information for his own personal benefit, the corporate insider breaches his duty to the shareholders.12 The corporate insider is under a duty to “disclose or abstain”13 — he must tell the shareholders of his knowledge and intention to trade or abstain from trading altogether.

There are at least two important variations of the classical theory of insider trading. The first is that even an individual who does not qualify as a traditional insider may become a “temporary insider” if by entering “into a special confidential relationship in the conduct of the business of the enterprise [they] are given access to information solely for corporate purposes.”14 Thus underwriters, accountants, lawyers, or consultants are all considered corporate insiders when by virtue of their professional relationship with the corporation they are given access to confidential information.15 The second variation is that an individual who receives information from a corporate insider may be, but is not always, prohibited from trading on that information as a tippee. “[T]he tippee’s duty to disclose or abstain is derivative from that of the insider’s duty” and the tippee’s obligation arises “from his role as a participant after the fact in the insider’s breach of a fiduciary duty.”16 Crucially, “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 tip-pee knows or should know there has been a breach.”17 The insider breaches his fiduciary duty when he receives a “direct or indirect personal benefit from the disclosure.”18

Both the temporary-insider and tippee twists on the classical theory retain its core principle that the duty to disclose or abstain is derived from the corporate insider’s duty to his shareholders. The misappropriation theory does not rest on this duty. It rather holds that a person violates section 10(b) “when he misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information.”19 The Supreme Court first adopted this theory in United States v. O’Hagan. 20 There, a lawyer traded the securities of a company his client was targeting for a takeover. O’Hagan could not be liable under the classical theory as he owed no duty to the shareholders of the target company. Nevertheless, the court found O’Hagan violated section 10(b). The Court held that in trading the target company’s securities, O’Hagan misappropriated the confidential information regarding the planned corporate takeover, breaching “a duty of trust and confidence” he owed to his law firm and client.21 Trading on such information *555“involves feigning fidelity to the source of information and thus utilizes a ‘deceptive device’ as required by section 10(b).”22 The Court stated that while there is “no general duty between all participants in market transactions to forgo actions based on material nonpublic information,” the breach of a duty to the source of the information is sufficient to give rise to insider trading liability.23

While O’Hagan did not set the contours of a relationship of “trust and confidence” giving rise to the duty to disclose or abstain and misappropriation liability, we are tasked to determine whether Cuban had such a relationship with Mamma.com. The SEC seeks to rely on Rule 10b5 — 2(b)(1), which states that a person has “a duty of trust and confidence” for purposes of misappropriation liability when that person “agrees to maintain information in confidence.”24 In dismissing the case, the district court read the complaint to allege that Cuban agreed not to disclose any confidential information but did not agree not to trade, that such a confidentiality agreement was insufficient to create a duty to disclose or abstain from trading under the misappropriation theory, and that the SEC overstepped its authority under section 10(b) in issuing Rule 10b5 — 2(b)(1). We differ from the district court in reading the complaint and need not reach the latter issues.

The complaint alleges that, in March 2004, Cuban acquired 600,000 shares, a 6.3% stake, of Mamma.com. Later that spring, Mamma.com decided to raise capital through a PIPE offering on the advice of the investment bank Merriman Curhan Ford & Co. At the end of June, at Merriman’s suggestion, Mamma.com decided to invite Cuban to participate in the PIPE offering. “The CEO was instructed to contact Cuban and to preface the conversation by informing Cuban that he had confidential information to convey to him in order to make sure that Cuban understood — before the information was conveyed to him — that he would have to keep the information confidential.”25

After getting in touch with Cuban on June 28, Mamma.com’s CEO told Cuban he had confidential information for him and Cuban agreed to keep whatever information the CEO shared confidential. The CEO then told Cuban about the PIPE offering. Cuban became very upset “and said, among other things, that he did not like PIPEs because they dilute the existing shareholders.”26 “At the end of the call, Cuban told the CEO ‘Well, now I’m screwed. I can’t sell.’ ”27

The CEO told the company’s executive chairman about the conversation with Cuban. The executive chairman sent an email to the other Mamma.com board members updating them on the PIPE offering. The executive chairman included:

Today, after much discussion, [the CEO] spoke to Mark Cuban about this equity raise and whether or not he would be interested in participating. As anticipated he initially “flew off the handle” and said he would sell his shares (recognizing that he was not able to do anything until we announce the equity) but *556then asked to see the terms and conditions which we have arranged for him to receive from one of the participating investor groups with which he has dealt in the past.

The CEO then sent Cuban a follow up email, writing “ ‘[i]f you want more details about the private placement please contact ... [Merriman].’ ”28

Cuban called the Merriman representative and they spoke for eight minutes. “During that call, the salesman supplied Cuban with additional confidential details about the PIPE. In response to Cuban’s questions, the salesman told him that the PIPE was being sold at a discount to the market price and that the offering included other incentives for the PIPE investors.”29 It is a plausible inference that Cuban learned the off-market prices available to him and other PIPE participants.

With that information and one minute after speaking with the Merriman representative, Cuban called his broker and instructed him to sell his entire stake in the company. Cuban sold 10,000 shares during the evening of June 28, 2004, and the remainder during regular trading the next day.

That day, the executive chairman sent another email to the board, updating them on the previous day’s discussions with Cuban, stating “ ‘we did speak to Mark Cuban ([the CEO] and, subsequently, our investment banker) to find out if he had any interest in participating to the extent of maintaining his interest. His answers were: he would not invest, he does not want the company to make acquisitions, he will sell his shares which he can not do until after we announce.’ ”30

After the markets closed on June 29, Mamma.com announced the PIPE offering. The next day, Mammaxom’s stock price fell 8.5% and continued to decline over the next week, eventually closing down 39% from the June 29 closing price. By selling his shares when he did, Cuban avoided over $750,000 in losses. Cuban notified the SEC that he had sold his stake in the company and publically stated that he sold his shares because Mamma.com “was conducting a PIPE, which issued shares at a discount to the prevailing market price and also would have caused his ownership position to be diluted.”31

In reading the complaint to allege only an agreement of confidentiality, the court held that Cuban’s statement that he was “screwed” because he “[could not] sell” “appears to express his belief, at least at that time, that it would be illegal for him to sell his Mamma.com shares based on the information the CEO provided.”32 But the court stated that this statement “cannot reasonably be understood as an agreement not to sell based on the information.”33 The court found “the complaint asserts no facts that reasonably suggest that the CEO intended to obtain from Cuban an agreement to refrain from trading on the information as opposed to an agreement merely to keep it confidential.”34 Finally, the court stated that “the CEO’s expectation that Cuban would not sell was also insufficient” to allege any further agreement.35

Reading the complaint in the light most favorable to the SEC, we reach a different *557conclusion. In isolation, the statement “Well, now I’m screwed. I can’t sell” can plausibly be read to express Cuban’s view that learning the confidences regarding the PIPE forbade his selling his stock before the offering but to express no agreement not to do so. However, after Cuban expressed the view that he could not sell to the CEO, he gained access to the confidences of the PIPE offering. According to the complaint’s recounting of the executive chairman’s email to the board, during his short conversation with the CEO regarding the planned PIPE offering, Cuban requested the terms and conditions of the offering. Based on this request, the CEO sent Cuban a follow up email providing the contact information for Merriman. Cuban called the salesman, who told Cuban “that the PIPE was being sold at a discount to the market price and that the offering included other incentives for the PIPE investors.”36 Only after Cuban reached out to obtain this additional information, following the statement of his understanding that he could not sell, did Cuban contact his broker and sell his stake in the company.

The allegations, taken in their entirety, provide more than a plausible basis to find that the understanding between the CEO and Cuban was that he was not to trade, that it was more than a simple confidentiality agreement. By contacting the sales representative to obtain the pricing information, Cuban was able to evaluate his potential losses or gains from his decision to either participate or refrain from participating in the PIPE offering. It is at least plausible that each of the parties understood, if only implicitly, that Mamma.com would only provide the terms and conditions of the offering to Cuban for the purpose of evaluating whether he would participate in the offering, and that Cuban could not use the information for his own personal benefit.37 It would require additional facts that have not been put before us for us to conclude that the parties could not plausibly have reached this shared understanding. Under Cuban’s reading, he was allowed to trade on the information but prohibited from telling others — in effect providing him an exclusive license to trade on the material nonpublic information. Perhaps this was the understanding, or perhaps Cuban mislead the CEO regarding the timing of his sale in order to obtain a confidential look at the details of the PIPE. We say only that on this factually sparse record, it is at least equally plausible that all sides understood there was to be no trading before the PIPE.38 That both Cuban and the CEO *558expressed the belief that Cuban could not trade appears to reinforce the plausibility of this reading.39

Given the paucity of jurisprudence on the question of what constitutes a relationship of “trust and confidence” and the inherently fact-bound nature of determining whether such a duty exists, we decline to first determine or place our thumb on the scale in the district court’s determination of its presence or to now draw the contours of any liability that it might bring, including the force of Rule 10b5-2(b)(1).40 Rather, we VACATE the judgment dismissing the case and REMAND to the court of first instance for further proceedings including discovery, consideration of summary judgment, and trial, if reached.

WALKER, Circuit Judge:

Jonathan Mayhew appeals from a final judgment of the United States District Court for the District of Connecticut (Janet Bond Arterton, District Judge) holding him liable, in a civil enforcement proceeding, for violating § 14(e) of the Securities and Exchange Act of 1934 (the “1934 Act”), 15 U.S.C. § 78n(e)', and Rule 14e-3, 17 C.F.R. § 240.14e-3, promulgated thereunder. SEC v. Mayhew, 916 F.Supp. 123 (D.Conn.1995).

The issue raised by this appeal is whether a person, who does not have a fiduciary duty to a corporation, is liable under § 14(e) and Rule 14e-3 when he trades in the corporation’s securities based on information disclosed to him indirectly by a corporate insider to the effect that a merger is imminent and probable by confirming rumors, widely circulated in the financial press, that the corporation is engaged in serious negotiations with one or more merger candidates. On appeal, Mayhew contends the district court erred in finding him hable for insider trading that violates § 14(e), claiming that the information which he received was neither nonpublie and material nor “in connection with” a tender offer. In its cross-appeal, the Securities and Exchange Commission (the “Commission”) contends that the district court erred by overlooking its prayer for an assessment of civil penalties under the Insider Trading Sanctions Act (“ITSA”), 15 U.S.C. § 78u-l(a). We reject each contention and affirm the district court in all respects.

*48BACKGROUND

In 1988, defendant Jonathan Mayhew, formerly a corporate pilot, turned to securities trading as a full-time occupation. His strategy was to invest in the stock of companies he believed to be takeover candidates. In 1989, Mayhew and his Darien, Connecticut neighbor, Dr. Edmund Piccolino, saw each other two or three times a week, typically on exercise walks. On these walks, Mayhew and Piccolino, whom Mayhew knew to be a partner at the consulting firm of Personnel Corporation of America (“PCA”), often discussed securities investment strategies. One such discussion, sometime after November 15, 1989, led to this enforcement action by the Commission.

From July 1989 through January 1990, representatives of Rorer Group, Inc. (“Rorer”) and Rhone-Poulenc S.A. (“RPSA”) held a series of confidential discussions which culminated in RPSA’s tender offer for Rorer’s pharmaceuticals business. To preserve the confidentiality of these discussions, Rorer and RPSA signed a confidentiality agreement in August 1989, restricted knowledge of the impending tender offer to a few executives, and used code words to refer to the two companies in documents relating to the merger. In October 1989, Rorer and RPSA retained McKinsey & Company, Inc., a management consulting firm, to assist in compiling and presenting financial projections for each company separately and to help construct a joint strategy for the combination.

In early November 1989, Ralph Thurman, president of Rorer’s pharmaceuticals business, and other top Rorer executives met in Paris, France, with representatives of RPSA and consultants from McKinsey to discuss the structure of the contemplated merger and present business projections for Rorer’s pharmaceuticals business. After this meeting, Thurman believed that the merger was “highly likely” to proceed.

During the course of the negotiations, Robert Cawthorn, Rorer’s Chief Executive Officer (“CEO”), asked Thurman to recommend a consultant to work on Cawthom’s employment contract in light of the anticipated combination with RPSA. Thurman suggested Piccolino, who previously had been a consultant for Rorer and with whom Thurman had a prior independent business relationship.

On November 15, upon his return from Paris, Thurman met with Piccolino to discuss the possibility of PCA negotiating Cawthorn’s employment agreement in connection with a “pending business transaction,” which he described, “giving [Piccolino] as little specifics as [he] needed to” explain to Piccolino why Cawthorn needed the work done. Thurman testified at trial that he “absolutely” expected Piccolino to keep the information confidential.

Piccolino testified that, during this meeting, Thurman revealed that Rorer “was being pursued and/or was actively pursuing companies to merge or integrate or acquire” and that “the company had been approached and was discussing alternatives as an active ongoing part of their life. [Thurman] was pretty circumspect about it, but, nonetheless, you got the impression that activity was under way.” Thurman wanted to know “how do you know if you can trust someone when you are getting into a complex merger negotiation.” Piccolino also testified as follows:

Q: But, nevertheless, it was Randy Thurm[an] who told you at the lunch that they are definitely involved in serious talks with a potential suitor or merger candidate.

A: Absolutely.

Q: We left the realm, as it was reported in magazine articles elsewhere, of a speculative nature of Rorer being one of the Potential [sic] candidates, plural, and moving into the area of [a] senior officer of Rorer saying to you we are in serious talks with a potential merger candidate or candidates?

A: Yes.

Piccolino concluded: “I walked away from that meeting with the knowledge that there was actually activity — they were actually in discussions with somebody or many players....”

Prior to November 15, 1989, the financial press had periodically published articles sug*49gesting that Rorer might be a takeover candidate. During the summer of 1989, May-hew “speculated [with Piccolino] on more than one occasion that Rorer was a company that was ripe to be acquired or merged with another company.” In September 1989, Mayhew began to trade in Rorer securities. But his Rorer trading ended on November 8, 1989, when Mayhew sold the last of his Rorer securities, sustaining a loss on all his Rorer trades of $11,500.

Following his November 15, 1989 meeting with Thurman, Piccolino “relayed the essence of that conversation [with Thurman]” to Mayhew and specifically “identified] Randy Thurm[an] to Mayhew.” He told Mayhew that Thurman, a Rorer insider, had confirmed Mayhew’s theory that Rorer was ripe to be acquired and that Rorer was actively pursuing a partner. Mayhew has consistently denied any recollection of this conversation.

Piccolino testified that, after disclosing to Mayhew the information he had obtained from Thurman, he asked Mayhew to advise him on an appropriate investment strategy. Following this discussion, although he had never before purchased Rorer securities and was personally unfamiliar with option trading, Piccolino bought 25 call options in Rorer stock on November 16,1989.

Also on November 16, 1989, eight days after liquidating his entire position in Rorer at a loss, Mayhew began to switch most of his investment portfolio, then valued at about $600,000, back into Rorer securities. By January 9, 1990, Mayhew had amassed more than $430,000 in Rorer stocks and options.

Mayhew testified that these purchases were motivated by the information he gathered from publicly disseminated articles and from closely following Rorer stock activity. Mayhew claimed that his November purchases were motivated by an “upside volume” in Rorer securities; however, market records show that both the price and the daily volume of Rorer shares traded fell during November.

On January 15, 1990, Rorer publicly announced that it was discussing a contemplated tender offer with an unnamed third party and disclosed the terms of the proposed combination. That same day, following the announcement, the price of Rorer stock rose from $49.75 to $63 per share, and the following day Mayhew sold his accumulated Rorer securities for a profit of $255,550.01.

On August 9, 1994, the Commission filed a civil enforcement proceeding against Mayhew claiming that his trades in Rorer securities between November 16, 1989 and January 15, 1990 violated §§ 10(b) and 14(e) of the 1934 Act, 15 U.S.C. §§ 78j(b) & 78n(e), and Rules 10b-5 and 14e-3, 17 C.F.R. §§ 240.10b-5 & 240.14e-3, promulgated thereunder. After a bench trial, the district court found that Mayhew’s trades in Rorer securities during that period violated § 14(e) and Rule 14e-3, but not § 10(b) or Rule 10b-5. The district court ordered Mayhew to disgorge his wrongful gains of $255,550.01 from trading in Rorer securities between November 16, 1989 and January 15, 1990, plus prejudgment interest. The district court also entered a permanent injunction against Mayhew, but did not order sanctions under the ITSA.

DISCUSSION

The Supreme Court, in United States v. O’Hagan, — U.S. -,-, 117 S.Ct. 2199, 2216-19, 138 L.Ed.2d 724 (1997), faced with a claim that Rule 14e-3 exceeded the Commission’s authority under § 14(e) of the 1934 Act, recently upheld the validity of Rule 14e-3 which imposes liability on persons who trade on material, nonpublie information in connection with a tender offer without regard to whether the trader owes a fiduciary duty to respect the confidentiality of the information. See also United States v. Chestman, 947 F.2d 551, 557 (2d Cir.1991) (in banc), cert. denied, 503 U.S. 1004, 112 S.Ct. 1759, 118 L.Ed.2d 422 (1992).

On appeal, Mayhew does not question the rule-making authority of the Commission in promulgating Rule 14e-3; instead, he challenges the sufficiency of the evidence in support of the district court’s finding of Rule 14e-3 liability. He claims that any information he received from Piccolino was already public when he obtained it; that even if the information was nonpublic, it lacked the requisite detail to be material; and finally, that *50the information was not “in connection with” a tender offer because the projected tender offer did not occur until two months after Mayhew’s receipt of the information. The Commission cross-appeals, claiming that the district court erred when it overlooked the Commission’s claim for civil penalties under the ITSA.

I. Sufficiency of the Evidence

Turning first to Mayhew’s sufficiency of the evidence arguments, we note that the district court’s factual findings on that score must be upheld unless clearly erroneous. SEC v. Posner, 16 F.3d 520, 521 (2d Cir.1994), cert. denied, 513 U.S. 1077, 115 S.Ct. 724, 130 L.Ed.2d 629 (1995). The dis trict court’s determination of the applicable legal principles is reviewed de novo. United States v. Russo, 74 F.3d 1383, 1389 (2d Cir.), cert. denied, — U.S.-, 117 S.Ct. 293, 136 L.Ed.2d 213 (1996).

A. Nonpublic Information Requirement

Citing articles in the financial press and the fluctuations in the price of Rorer shares prior to his November 1989 conversation with Piecolino, Mayhew argues that the information he received from Piecolino was already public, relieving him of liability.

Of course, trading based on public information does not violate § 14(e). See United States v. Libera, 989 F.2d 596, 601 (2d Cir.1993). Information becomes public when disclosed “to achieve a broad dissemination to the investing public generally and without favoring any special person or group,” Dirks v. SEC, 463 U.S. 646, 653 n. 12, 103 S.Ct. 3255, 3261 n. 12, 77 L.Ed.2d 911 (1983) (citing In re Faberge, Inc., 45 S.E.C. 249, 256 (1973)), or when, although known only by a few persons, their trading on it “has caused the information to be fully impounded into the price of the particular stock,” Libera, 989 F.2d at 601. Moreover, “[t]o constitute non-public information under the act, information must be specific and more private than general rumor.” United States v. Mylett, 97 F.3d 663, 666 (2d Cir.1996), cert. denied, — U.S.-, 117 S.Ct. 2509, 138 L.Ed.2d 1013 (1997). On the other hand, information may be nonpublic within the meaning of the 1934 Act even though it does not reveal all the details of a tender offer. See, e.g., id. at 666-67.

Mayhew bases his argument on the widespread media speculation, prior to November 15, 1989, that Rorer was a takeover or merger candidate. As early as April 5, 1988, one article predicted that “Rorer itself ha[d] become a takeover candidate” after its stock price dropped following Rorer’s failed attempt to acquire another pharmaceutical company. Heartburn, Fin. World, Apr. 5, 1988, at 24. On May 30,1989, another article placed Rorer on a “hit list” of six pharmaceutical companies that it predicted were vulnerable takeover targets. Robert Teitelman, Pharmaceuticals, Fin. World, May 30, 1989, at 57. On July 31, 1989, an article discussed the rise in Rorer stock due to “speculation about the next takeover target” in the pharmaceutical industry. Douglas R. Sease, Upward Mobility: Available Cash May Propel Stocks Even Higher, Wall St. J., July 31, 1989. In contrast, another article indicated that Rorer planned to stay independent. Janet Novack, Please Pass the Maalox, Forbes, Aug. 7,1989, at 114.

Other articles published before November 15, 1989, reported on the effects of the rumored takeover on Rorer’s stock price. An August 21,1989 article discussed the jump in the price of Rorer stock following a May 1989 announcement by Cawthorn that he was “willing to merge [Rorer] with the ‘right partner’” and the subsequent fall in Rorer stock when “the right partner didn’t come around.” Gene G. Marcial, Has Rorer Found A Friend?, Bus. Wk., Aug. 21, 1989, at 88. The article then reported that “takeover pros” predicted that a “partner apparently is in sight” and that two major United States pharmaceutical companies, possibly Upjohn, and a European conglomerate “are whispered to have informally talked with Rorer about a possible merger or outright takeover.” Id.

In sum, the aggregate of public information prior to November 15, 1989, was to the effect that Rorer was willing to merge if it found the right partner and that Rorer was discussing this possibility with up to three *51companies. Privately, Rorer executives took care to keep information about actual merger discussions secret by limiting the persons who knew about specific merger negotiations to top executives and by using codes in related documents.

We agree with the district court that the information Piccolino conveyed to Mayhew went beyond that which had been publicly disseminated. Mayhew learned from Piccolino that Thurman, the president of Rorer’s pharmaceuticals business, had confirmed that Rorer was “actually in discussions” toward merger with a candidate or candidates. He also learned that these merger talks were at a “serious” stage — far enough along to warrant PCA’s involvement in negotiating a new employment agreement for Rorer’s CEO. To a reasonable investor, this combination of new information, acquired privately, transformed the likelihood of a Rorer merger from one that was certainly possible at some future time to one that was highly probable quite soon.

In Mylett, we held that a corporate insider’s confirmation of information on which the financial press had speculated can satisfy the nonpublic requirement in the context of § 10(b). In that case, the Wall Street Journal had reported that AT & T and NCR Corporation were discussing ways to integrate their businesses. On the same day that the article was published, an AT & T insider called Cusimano to confirm the contents of the article and predicted that AT & T would acquire NCR. Cusimano subsequently began trading in NCR securities. 97 F.3d at 665-66. We held that the tip Cusimano received satisfied the nonpublic requirement of § 10(b) because the confirmation by an insider of the merger speculated in the press made it less likely that nothing would happen. Id. at 666-67. We see no reason to take a different view under similar circumstances in the context of § 14(e), and thus discern no error in the district court’s finding that the information passed from Thurman to Piccolino to Mayhew exceeded that in the financial press and, to that extent, was not public.

In the alternative, Mayhew argues that the information he received from Piecolino was public because it was already built into the price of Rorer stock which had risen on speculation of merger and subsequently fallen as rumored mergers did not take place. We agree that the merger rumors in the media, prior to November 15, 1989, had pushed up the price of Rorer shares; however, the fact that, from the investors’ perspective, the rumors had not borne fruit was also impounded into the price, causing it to drop. In these circumstances, it was reasonable for the finder of fact to conclude that this new information that (i) serious merger negotiations were actually ongoing, and (ii) had reached the point where the CEO was about to negotiate a new employment contract with the merged entity, had not been impounded into the price of Rorer stock. That conclusion is buttressed by the fact that on January 15, 1989, when the merger discussions were disclosed, the price of Rorer stock rose more than 20 percent from $49.75 to $63 per share.

In sum, we discern no clear error in the district court’s finding that the information Mayhew received from Piccolino following the latter’s November 15,1989 luncheon with Thurman, effectively confirming information about which there had been speculation and lending a degree of immediacy to it, was nonpublic. See Libera, 989 F.2d at 601.

B. Materiality Requirement

Mayhew also challenges the district court’s materiality finding, arguing that the information he received from Piccolino lacked sufficient specificity to be material. We disagree.

Information is material “ ‘if there is a substantial likelihood that a reasonable [investor] would consider it important in deciding how to [invest].’ ” Basic Inc. v. Levinson, 485 U.S. 224, 231, 108 S.Ct. 978, 983, 99 L.Ed.2d 194 (1988) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 2132, 48 L.Ed.2d 757 (1976)); Macfadden Holdings, Inc. v. JB Acquisition Corp., 802 F.2d 62, 69 n. 3 (2d Cir.1986). The materiality of information is a mixed question of law and fact. SEC v. First Jersey Sec., Inc., 101 F.3d 1450, 1466 (2d Cir.1996), petition for cert. filed, 65 U.S.L.W. 3799 (U.S. *52May 23, 1997) (No. 96-1862). “The legal component depends on whether the information is relevant to a given question in light of the controlling substantive law. The factual component requires an inference as to whether the information would likely be given weight by a person considering that question.” Id. at 1466-67 (citations omitted).

To be material, the information need not be such that a reasonable investor would necessarily change his investment decision based on the information, as long as a reasonable investor would have viewed it as significantly altering the “total mix” of information available. TSC Indus., 426 U.S. at 449, 96 S.Ct. at 2132; Flynn v. Bass Bros. Enters., 744 F.2d 978, 985 (3d Cir.1984). Material facts include those “which affect the probable future of the company and those which may affect the desire of investors to buy, sell, or hold the company’s securities.” SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 849 (2d Cir.1968) (in banc). They include any fact “which in reasonable and objective contemplation might affect the value of the corporation’s stock or securities.” Id. at 849 (quoting List v. Fashion Park, Inc., 340 F.2d 457, 462 (2d Cir.1965)).

In the context of a merger, where information can be speculative and tenuous, the materiality standard may be difficult to apply. Cf. Basic, 485 U.S. at 236, 108 S.Ct. at 986. Materiality will, in such cases, depend “upon a balancing of both the indicated probability that the event will occur and the anticipated magnitude of the event in light of the totality of the company activity.” Id. at 238, 108 S.Ct. at 987 (quoting Texas Gulf Sulphur Co., 401 F.2d at 849). Thus, a violation of the securities laws will not be found where “the disclosed information is so general that the recipient thereof is still ‘undertaking a substantial economic risk that his tempting target will prove to be a “white elephant.” ’ ” SEC v. Monarch Fund, 608 F.2d 938, 942 (2d Cir.1979) (quoting United States v. Chiarella, 588 F.2d 1358, 1366-67 (2d Cir.1978), rev’d on other grounds, 445 U.S. 222, 100 S.Ct. 1108, 63 L.Ed.2d 348 (1980)). However, because a merger is one of the most important events that can occur for a small company, information regarding a merger “can become material at an earlier stage than would be the case as regards lesser transactions.” SEC v. Geon Indus., Inc., 531 F.2d 39, 47 (2d Cir.1976). Moreover, where information regarding a merger originates from an insider, the information, even if not detailed, “takes on an added charge just because it is inside information.” Id. at 48; see also Monarch Fund, 608 F.2d at 942. And a major factor in determining whether information was material is the importance attached to it by those who knew about it. See Texas Gulf Sulphur Co., 401 F.2d at 851.

In this case, it was reasonable for the district court to conclude the information material to Mayhew’s and Piccolino’s decisions to invest, in Piccolino’s case for the first time in options and for the first time in Rorer securities. Although Mayhew had invested in Rorer prior to November 15, 1989, he had sold all his Rorer shares at a loss by that date. After the Thurman-Piccolino luncheon, Mayhew plunged heavily into Rorer stock and options, committing more than half of his portfolio to the investment. Although Mayhew was not given the specific details of the merger, a lesser level of specificity is required because he knew the information came from an insider and that the merger discussions were actual and serious. See, e.g., Mylett, 97 F.3d at 667; SEC v. Shapiro, 494 F.2d 1301, 1306-1307 (2d Cir.1974) (Information regarding a merger was material although “negotiations had not jelled to the point where a merger was probable.”); see also Holmes v. Bateson, 583 F.2d 542, 558 (1st Cir.1978) (merger negotiations material although parties had not discussed precise terms); SEC v. Gaspar, No. 83 Civ. 3037(CBM), 1985 WL 521, at *14-*15 (S.D.N.Y. Apr. 16,1985) (merger negotiations material although they did not proceed to making of actual tender offer). We see no basis for disturbing the district court’s conclusions that a reasonable investor would find the information to have significantly altered the total mix of available information and that the information was, thus, material.

C. “In Connection With’’ A Tender Offer

Finally, Mayhew claims that the district court erred in finding that the tip he *53received was “in connection with” a tender offer because, at the time he received the tip, Rorer and RPSA had not taken “substantial steps” toward a tender offer as evidenced by the fact that RPSA did not make the tender offer for another two months. Alternatively, Mayhew argues that the two month lag between the tip and tender offer precludes a finding that the tip was “in connection with” a tender offer under § 14(e) as a matter of law. See, e.g., Frankel v. Slotkin, 705 F.Supp. 105, 109 (E.D.N.Y.1989), aff'd, 984 F.2d 1328 (2d Cir.1993). We disagree.

Liability under Rule 14e-3 attaches only when a “substantial step or steps” have been taken to accomplish a tender offer. See 17 C.F.R. § 240.14e-3(a); Chestman, 947 F.2d at 557. We have no difficulty in concluding that, in this case, such steps had been taken. Prior to Mayhew’s November 1989 conversation with Piccolino, Rorer and RPSA had retained a consulting firm, signed confidentiality agreements, and held meetings between top officials. These steps satisfy the substantiality requirement of Rule 14e-3. See, e.g., SEC v. Maio, 51 F.3d 623, 636 (7th Cir.1995) (meeting of officials “much more serious than any previous discussion between the parties” satisfies substantial steps requirement); SEC v. Musella, 578 F.Supp. 425, 443-44 (S.D.N.Y.1984) (retaining law firm before tender offer is a substantial step); Camelot Indus., Corp. v. Vista Resources, Inc., 535 F.Supp. 1174, 1183 (S.D.N.Y.1982) (meeting between officers is a substantial step).

Moreover, liability can attach under § 14(e) even though there is a two month lag between the tip and the tender offer. Congress intended § 14(e) to be a broad antifraud remedy in the area of tender offers. See Piper v. Chris-Craft Indus., Inc., 430 U.S. 1, 35, 97 S.Ct. 926, 946, 51 L.Ed.2d 124 (1977); see also O’Hagan, — U.S. -, -, 117 S.Ct. 2199, 2216, 138 L.Ed.2d 724; see also Russo, 74 F.3d at 1390-91 (noting that “in connection with” language of § 10(b) satisfied where deceptive practice touches sales of securities); In re Ames Dep’t Stores Inc. Stock Litigation, 991 F.2d 953, 964-68 (2d Cir.1993) (rejecting narrow interpretation of § 10(b)’s “in connection with” language). Any arbitrary temporal limit would frustrate that purpose. It would permit parties to freely misuse information regarding a tender offer “up to [that limit], thus defeating in substantial part the very purpose of the Act — informed decisionmaking by shareholders.” Lewis v. McGraw, 619 F.2d 192, 195 (2d Cir.1980) (per curiam). Instead, we must decide whether information is “in connection with” a tender offer on the facts of each particular case. See e.g., Maio, 51 F.3d at 636.

In this case, the nexus between the tip and the tender offer is self-evident. The information disclosed that Rorer was engaged in actual ongoing discussions with a merger candidate or candidates. The information had no value whatsoever except “in connection with” Mayhew’s subsequent purchase of securities in anticipation of the tender offer. Cf. SEC v. Materia, 745 F.2d 197, 203 (2d Cir.1984). See generally O’Hagan, at —---, 117 S.Ct. 2199, 2208-11 (Section 10(b)’s “in connection with” requirement satisfied, under misappropriation theory, where “fiduciary’s fraud is consummated ... when, without disclosure to his principal, he uses the information to purchase or sell securities.”). Because, at the time Mayhew traded in Rorer’s securities, Rorer and RPSA had taken substantial steps toward the tender offer, and because the information concerned the tender offer and derived value from its nexus to the tender offer, we easily conclude that the “in connection with” requirement of § 14(e) is satisfied.

II. Insider Trading Sanctions Act

Finally, we turn to the Commission’s cross-appeal on the issue of civil penalties under the Insider Trading Sanctions Act, 15 U.S.C. § 78u-l(a). In its opinion, the district court overlooked the Commission’s claim for civil penalties and therefore awarded none. The Commission failed to bring this omission to the district court’s attention, and now asks us to remand to the district court to reconsider its failure to award civil penalties. We decline to do so.

Generally, a party disadvantaged by a district court’s ruling is not required to *54move for reconsideration in the district court as a precondition to an appeal from the ruling. Richardson v. Oldham, 12 F.3d 1373, 1377 (5th Cir.1994); Chicago College of Osteopathic Medicine v. George A. Fuller Co., 719 F.2d 1335, 1349 n. 24 (7th Cir.1983); 11 Charles Alan Wright, et al., Federal Practice and Procedure § 2818 (2d ed.1995). This is not, however, a case where the district court issued a disadvantageous ruling, but gave insufficient reasons, see, e.g., Cohen v. FB Air, Inc., 995 F.2d 378, 379 (2d Cir.1993); nor is it one where the district court adverted to the issue but chose not to reach it because it found another dispositive, see, e.g., Musso v. Hourigan, 836 F.2d 736, 742 (2d Cir.1988). In this case, the district court simply never addressed the issue of ITSA penalties at all.

We will not fault the trial court for failing to award penalties under the ITSA, where the Commission never brought the district court’s omission to its attention. “Had such [a] procedure been followed the trial court could, in the light of all the facts then recently before it, have passed upon this point.” Vaught v. Childs Co., 277 F.2d 516, 518 (2d Cir.1960) (failure to raise motion for new trial precluded appeal on issue of whether jury verdict in personal injury case was excessive); see, e.g., Velazquez v. Figueroa-Gomez, 996 F.2d 425, 427 (1st Cir.1993) (appellant precluded from seeking new trial on appeal where he did not raise new trial motion in district court); Baker v. Dillon, 389 F.2d 57, 58 (5th Cir.1968) (failure of defendant to make a motion for reconsideration of the amount of the jury award precluded appeal on the point). This is fully consistent with the general policy underlying error preservation that the best place to correct error in the first instance is in the trial court where, for reasons of economy and sound judicial administration, the principal focus of the litigation should be. We therefore deny the Commission’s cross-appeal.

CONCLUSION

For the reasons stated above, we affirm the district court’s holding of liability as to Mayhew under § 14(e) and Rule 14e-3 and refuse the Commission’s request to remand the case to the district court for imposition of civil damages under the Insider Trading Sanctions Act.