Mr. Justice Rehnquist

delivered the opinion of the Court.

This case requires us to consider whether the offerees of a stock offering, made pursuant to an antitrust consent decree and registered under the Securities Act of 1933, 48 Stat. 74, as amended, 15 U. S. C. § 77a et seg. (1933 Act), may maintain a private cause of action for money damages where they allege that the offeror has violated the provisions of Rule 10b-5 of the Securities and Exchange Commission, but where they have neither purchased nor sold any of the offered shares. See Birnbaum v. Newport Steel Corp., 193 F. 2d 461 (CA2), cert. denied, 343 U. S. 956 (1952).

I

In 1963 the United States filed a civil antitrust action against Blue Chip Stamp Co. (Old Blue Chip), a company in the business of providing trading stamps to retailers, and nine retailers who owned 90% of its shares. In 1967 the action was terminated by the entry of a consent decree. United States v. Blue Chip Stamp Co., 272 F. Supp. 432 (CD Cal.), aff’d sub nom. Thrifty Shoppers Scrip Co. v. United States, 389 U. S. 580 (1968).1 The decree contemplated a plan of reorganiza*726tion whereby Old Blue Chip was to be merged into a newly formed corporation, Blue Chip Stamps (New Blue Chip). The holdings of the majority shareholders of Old Blue Chip were to be reduced, and New Blue Chip, one of the petitioners here, was required under the plan to offer a substantial number of its shares of common stock to retailers who had used the stamp service in the past but who were not shareholders in the old company. Under the terms of the plan, the offering to nonshareholder users was to be proportional to past stamp usage and the shares were to be offered in units consisting of common stock and debentures.

The reorganization plan was carried out, the offering was registered with the SEC as required by the 1933 Act, and a prospectus was distributed to all offerees as required by § 5 of that Act, 15 U. S. C. § 77e. Somewhat more than 50% of the offered units were actually purchased. In 1970, two years after the offering, respondent, a former user of the stamp service and therefore an offeree of the 1968 offering, filed this suit in the United States District Court for the Central District of California. Defendants below and petitioners here are Old and New Blue Chip, eight of the nine majority shareholders of Old Blue Chip, and the directors of New Blue Chip (collectively called Blue Chip).

Respondent’s complaint alleged, inter alia, that the prospectus prepared and distributed by Blue Chip in connection with the offering was materially misleading in its overly pessimistic appraisal of Blue Chip’s status and future prospects. It alleged that Blue Chip intentionally made the prospectus overly pessimistic in order to discourage respondent and other members of the allegedly large class whom it represents from accepting what was *727intended to be a bargain offer, so that the rejected shares might later be offered to the public at a higher price. The complaint alleged that class members because of and in reliance on the false and misleading prospectus failed to purchase the offered units. Respondent therefore sought on behalf of the alleged class some $21,400,000 in damages representing the lost opportunity to purchase the units; the right to purchase the previously rejected units at the 1968 price; and in addition, it sought some $25,000,000 in exemplary damages.

The only portion of the litigation thus initiated which is before us is whether respondent may base its action on Rule 10b-5 of the Securities and Exchange Commission without having either bought or sold the securities described in the allegedly misleading prospectus. The District Court dismissed respondent’s complaint for failure to state a claim upon which relief might be granted.2 On appeal to the United States Court of Appeals for the Ninth Circuit, respondent pressed only its asserted claim under Rule 10b-5, and a divided panel of the Court of Appeals sustained its position and reversed the District Court.3 After the Ninth Circuit denied rehearing en banc, we granted Blue Chip’s petition for certiorari. 419 U. S. 992 (1974). Our consideration of the correctness of the determination of the Court of Appeals requires us to consider what limitations there are on the class of plaintiffs who may maintain a private cause of action for money damages for violation of Rule 10b-5, and whether respondent was within that class.

II

During the early days of the New Deal, Congress enacted two landmark statutes regulating securities. *728The 1933 Act was described as an Act to “provide full and fair disclosure of the character of securities sold in interstate and foreign commerce and through the mails, and to prevent frauds in the sale thereof, and for other purposes.” The Securities Exchange Act of 1934. 48 Stat. 881, as amended, 15 U. S. C. § 78a et seq. (1934 Act), was described as an Act “to provide for the regulation of securities exchanges and of over-the-counter markets operating in interstate and foreign commerce and through the mails, to prevent inequitable and unfair practices on such exchanges and markets, and for other purposes.”

The various sections of the 1933 Act dealt at some length with the required contents of registration statements and prospectuses, and expressly provided for private civil causes of action. Section 11 (a) gave a right of action by reason of a false registration statement to “any person acquiring” the security, and § 12 of that Act gave a right to sue the seller of a security who had engaged in proscribed practices with respeet to prospectuses and communication to “the person purchasing such security from him.”

The 1934 Act was divided into two titles. Title I was denominated “Regulation of Securities Exchanges,” and Title II was -denominated “Amendments to Securities Act of 1933.” Section 10 of that Act makes it “unlawful for any person . . . (b) [t]o 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 Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.” The “Commission” referred to in the section was the Securities and Exchange Commis*729sion created by § 4 (a) of the 1934 Act. Section 29 of that Act provided that “[e]very contract made in violation of any provision of this chapter or of any rule or regulation thereunder” should be void.

In 1942, acting under the authority granted to it by § 10 (b) of the 1934 Act, the Commission promulgated Rule 10b-5, 17 CFR § 240.10b-5, now providing as follows:

Ҥ 240.10b-5 Employment of manipulative and deceptive devices.

“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,

“(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.”

Section 10 (b) of the 1934 Act does not by its terms provide an express civil remedy for its violation. Nor does the history of this provision provide any indication that Congress considered the problem of private suits under it at the time of its passage. See, e. g., Note, Implied Liability Under the Securities Exchange Act, 61 Harv. L. Rev. 858, 861 (1948); A. Bromberg, Securities Law: Fraud — SEC Rule 10b-5 § 2.2 (300)-(340) (1968) (hereinaftér Bromberg); S. Rep. No. 792, 73d Cong., 2d *730Sess., 5-6 (1934). Similarly there is no indication that the Commission in adopting Rule 10b-5 considered the question of private civil remedies under this provision. SEC Securities Exchange Act Release No. 3230 (1942); Conference on Codification of the Federal Securities Laws, 22 Bus. Law. 793, 922 (1967); Birnbaum v. Newport Steel Corp., 193 F. 2d, at 463; 3 L. Loss, Securities Regulation 1469 n. 87 (2d ed. 1961).

Despite the contrast between the provisions of Rule 10b-5 and the numerous carefully drawn express civil remedies provided in the Acts of both 1933 and 1934,4 it was held in 1946 by the United States District Court for the Eastern District of Pennsylvania that there was an implied private right of action under the Rule. Kardon v. National, Gypsum, Co., 69 F. Supp. 512. .This Court had no occasion to deal with the subject until 25 years later, and at that time we confirmed with virtually no discussion the overwhelming consensus of the District Courts and Courts of Appeals that such a cause of action did exist. Superintendent of Insurance v. Bankers Life & Cas. Co., 404 U. S. 6, 13 n. 9 (1971); Affiliated Ute Citizens v. United States, 406 U. S. 128, 150-154 (1972). Such a conclusion was, of course, entirely consistent with the Court’s recognition in J. I. Case Co. v. Borak, 377 U. S. 426, 432 (1964), that private enforcement of Commission rules may “[provide] a necessary supplement to Commission action.”

Within a few years after the seminal Kardon decision, the Court of Appeals for the Second Circuit concluded that the plaintiff class for purposes of a private damage action under § 10 (b) and Rule 10b-5 was limited to actual purchasers and sellers of securities. Birnbaum v. Newport Steel Corp., supra.

*731The Court of Appeals in this case did not repudiate Birnbaum; indeed, another panel of that court (in an opinion by Judge Ely) had but a short time earlier affirmed the rule of that case. Mount Clemens Industries, Inc. v. Bell, 464 F. 2d 339 (1972). But in this case a majority of the Court of Appeals found that the facts warranted an exception to the Birnbaum rule. For the reasons hereinafter stated, we are of the opinion that Birnbaum was rightly decided, and that it bars respondent from maintaining this suit under Rule 10b-5.

Ill

The panel which decided Birnbaum consisted of Chief Judge Swan and Judges Learned Hand and Augustus Hand: the opinion was written by the last named. Since both § 10 (b) and Rule 10b-5 proscribed only fraud “in connection with the purchase or sale” of securities, and since the history of §10 (b) revealed no congressional intention to extend a private civil remedy for money damages to other than defrauded purchasers or sellers of securities, in contrast to the express civil remedy provided by § 16 (b) of the 1934 Act, the court concluded that the plaintiff class in a Rule 10b-5 action was limited to actual purchasers and sellers. 193 F. 2d, at 463-464.

Just as this Court had no occasion to consider the validity of the Kardon holding that there was a private cause of action under Rule 10b-5 until 20-odd years later, nearly the same period of time has gone by between the Birnbaum decision and our consideration of the case now before us. As with Kardon, virtually all lower federal courts facing the issue in the hundreds of reported cases presenting this question over the past quarter century have reaffirmed Birnbaum’s conclusion that the plaintiff class for purposes of § 10 (b) and Rule 10b-5 private damage actions is limited to purchasers and sell*732ers of securities. See 6 L. Loss, Securities Regulation 3617 (1969). See, e. g., Haberman v. Murchison, 468 F. 2d 1305, 1311 (CA2 1972); Landy v. FDIC, 486 F. 2d 139, 156-157 (CA3 1973), cert. denied, 416 U. S. 960 (1974); Sargent v. Genesco, Inc., 492 F. 2d 750, 763 (CA5 1974); Simmons v. Wolfson, 428 F. 2d 455, 456 (CA6 1970), cert. denied, 400 U. S. 999 (1971); City National Bank v. Vanderboom., 422 F. 2d 221, 227-228 (CA8), cert. denied, 399 U. S. 905 (1970); Mount Clemens Industries, Inc. v. Bell, supra; Jensen v. Voyles, 393 F. 2d 131, 133 (CA10 1968). Compare Eason v. General Motors Acceptance Corp., 490 F. 2d 654 (CA7 1973), cert. denied, 416 U. S. 960 (1974), with Dasho v. Susquehanna Corp., 380 F. 2d 262 (CA7), cert. denied sub nom. Bard v. Dasho, 389 U. S. 977 (1967).

In 1957 and again in 1959, the Securities and Exchange Commission sought from Congress amendment of § 10 (b) to change its wording from “in connection with the purchase or sale of any security” to “in connection with the purchase or sale of, or any attempt to purchase or sell, any security.” 103 Cong. Rec. 11636 (1957) (emphasis added); SEC Legislation, Hearings on S. 1178-1182 before a Subcommittee of the Senate Committee on Banking & Currency, 86th Cong., 1st Sess., 367-368 (1959); S. 2545, 85th Cong., 1st Sess. (1957); S. 1179, 86th Cong., 1st Sess. (1959). In the words of a memorandum submitted by the Commission to a congressional committee, the purpose of the proposed change was “to make section 10 (b) also applicable to manipulative activities in connection with any attempt to purchase or sell any security.” Hearings on S. 1178-1182, supra, at 331. Opposition to the amendment was based on fears of the extension of civil liability under § 10 (b) that it would cause. Id., at 368. Neither change was adopted by Congress.

*733The longstanding acceptance by the courts, coupled with Congress’ failure to reject Birnbaum’s reasonable interpretation of the wording of § 10 (b), wording which is directed toward injury suffered “in connection with the purchase or sale” of securities,5 argues significantly in favor of acceptance of the Birnbaum rule by this Court. Blau v. Lehman, 368 U. S. 403, 413 (1962).

Available evidence from the texts of the 1933 and 1934 Acts as to the congressional scheme in this regard, though not conclusive, supports the result reached by the Birnbaum court. The wording of § 10 (b) directed at fraud “in connection with the purchase or sale” of securities stands in contrast with the parallel antifraud provision of the 1933 Act, § 17 (a), as amended, 68 Stat. 686, 15 U. S. C. § 77q,6 reaching fraud *734“in the offer or sale” of securities. Cf. § 5 of the 1933 Act, 15 U. S. C. § 77e. When Congress wished to provide a remedy to those who neither purchase nor sell securities, it had little trouble in doing so expressly. Cf. § 16 (b) of the 1934 Act, 15 U. S. C. § 78p (b).

Section 28 (a) of the 1934 Act, 15 U. S. C. § 78bb (a), which limits recovery in any private damages action brought under the 1934 Act to “actual damages,” likewise provides some support for the purchaser-seller rule. See, e. g., Bromberg § 8.8, p. 221. While the damages suffered by purchasers and sellers pursuing a § 10 (b) cause of action may on occasion be difficult to ascertain, Affiliated Ute Citizens v. United States, 406 U. S., at 155, in the main such purchasers and sellers at least seek to base recovery on a demonstrable number of shares traded. In contrast, a putative plaintiff, who neither purchases nor sells securities but sues instead for intangible economic injury such as loss of a noncontractual opportunity to buy or sell, is more likely to be seeking a *735largely conjectural and speculative recovery in which the number of shares involved will depend on the plaintiff's subjective hypothesis. Cf. Estate Counseling Service, Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 303 F. 2d 527, 533 (CA10 1962); Levine v. Seilon, Inc., 439 F. 2d 328, 335 (CA2 1971); Wolf v. Frank, 477 F. 2d 467, 478 (CA5 1973).

One of the justifications advanced for implication of a cause of action under § 10 (b) lies in § 29 (b) of the 1934 Act, 15 U. S. C. § 78cc (b), providing that a contract made in violation of any provision of the 1934 Act is voidable at the option of the deceived party.7 See, e. g., Kardon v. National Gypsum Co., 69 F. Supp., at 514; Slavin v. Germantown Fire Insurance Co., 174 F. 2d 799, 815 (CA3 1949); Fischman v. Raytheon Mfg. Co., 188 F. 2d 783, 787 n. 4 (CA2 1951); Bromberg § 2.4 (1) (b). But that justification is absent when there is no actual purchase or sale of securities, or a contract to purchase or sell, affected or tainted by a violation of § 10 (b). Cf. Mount Clemens Industries, Inc. v. Bell, supra.

The principal express nonderivative private civil reme*736dies, created by Congress contemporaneously with the passage of § 10 (b), for violations of various provisions of the 1933 and 1934 Acts are by their terms expressly limited to purchasers or sellers of securities. Thus § 11 (a) of the 1933 Act confines the cause of action it grants to “any person acquiring such security” while the remedy granted by § 12 of that Act is limited to the “person purchasing such security.” Section 9 of the 1934 Act, prohibiting a variety of fraudulent and manipulative devices, limits the express civil remedy provided for its violation to “any person who shall purchase or sell any security” in a transaction affected by a violation of the provision. Section 18 of the 1934 Act, prohibiting false or misleading statements in reports or other documents required to be filed by the 1934 Act, limits the express remedy provided for its violation ■ to “any person . . . who . . . shall have purchased or sold a security at a price which was affected by such statement____” It would indeed be anomalous to impute to Congress an intention to expand the plaintiff class for a judicially implied cause of action beyond the bounds it delineated for comparable express causes of action.8

*737Having said all this, we would by no means be understood as suggesting that we are able to divine from the language of § 10(b) the express “intent of Congress" as to the contours of a private cause of action under Rule 10b-5. When we deal with private actions under Rule 10b 5. we deal with a judicial oak which has grown from little more than a legislative acorn. Such growth may be quite consistent with the congressional enactment and with the role of the federal judiciary in interpreting it. see J. I. Case Co. v. Borak, supra, but it would be disingenuous to suggest that either Congress in 1934 or the Securities and Exchange Commission in 1942 foreordained the present state of the law with respect to Rule 10b-5. It is therefore proper that we consider, in addition to the factors already discussed, what may be described as policy considerations when we come to flesh out the portions of the law with respect to which neither the congressional enactment nor the administrative regulations offer conclusive guidance.

Three principal classes of potential plaintiffs are presently barred by the Birnbaum rule. First are potential purchasers of shares, either in a new offering or on the Nation’s post-distribution trading markets, who allege that they decided not to purchase because of an unduly gloomy representation or the omission of favorable material which made the issuer appear to be a less favorable investment vehicle than it actually was. Second are actual shareholders in the issuer who allege that they decided not to sell their shares because of an *738unduly rosy representation or a failure to disclose unfavorable material. Third are shareholders, creditors, and perhaps others related to an issuer who suffered loss in the value of their investment due to. corporate or insider activities in connection with the purchase or sale of securities which violate Rule 10b-5. It has been held that shareholder members of the second and third of these classes may frequently be able to circumvent the Birnbaum limitation through bringing a derivative action on behalf of the corporate issuer if the latter is itself a purchaser or seller of securities. See, e. g., Schoenbaum v. Firstbrook, 405 F. 2d 215, 219 (CA2 1968), cert. denied sub nom. Manley v. Schoenbaum, 395 U. S. 906 (1969). But the first of these classes, of which respondent is a member, cannot claim the benefit of such a rule.

A great majority of the many commentators on the issue before us have taken the view that the Birnbaum limitation on the plaintiff class in a Rule 10b-5 action for damages is an arbitrary restriction which unreasonably prevents some deserving plaintiffs from recovering damages which have in fact been caused by violations of Rule 10b-5. See, e. g., Lowenfels, The Demise of the Birnbaum Doctrine: A New Era for Rule 10b-5, 54 Va. L. Rev. 268 (1968). The Securities and Exchange Commission has filed an amicus brief in this case espousing that same view. We have no doubt that this is indeed a disadvantage of the Birnbaum rule,9 and if it *739had no countervailing advantages it would be undesirable as a matter of policy, however much it might be supported by precedent and legislative history. But we are of the opinion that there are countervailing advantages to the Birnbaum rule, purely as a matter of policy, although those advantages are more difficult to articulate than is the disadvantage.

There has been widespread recognition that litigation under Rule 10b-5 presents a danger of vexatiousness different in degree and in kind from that which accompanies litigation in general. This fact was recognized by Judge Browning in his opinion for the majority of the Court of Appeals in this case, 492 F. 2d, at 141, and by Judge Hufstedler in her dissenting opinion when she said:

“The purchaser-seller rule has maintained the balances built into the congressional scheme by permitting damage actions to be brought only by those persons whose active participation in the marketing transaction promises enforcement of the statute without undue risk of abuse of the litigation process and without distorting the securities market.” Id., at 147.

Judge Friendly in commenting on another aspect of Rule 10b-5 litigation has referred to the possibility that unduly expansive imposition of civil liability “will lead to large judgments, payable in the last analysis by innocent investors, for the benefit of speculators and their lawyers . . . .” SEC v. Texas Gulf Sulphur Co., 401 F. 2d 833, 867 (CA2 1968) (concurring opinion). See also *740Boone & McGowan, Standing to Sue under SEC Rule 10b-5,49 Tex. L. Rev. 617, 648-649 (1971).

We believe that the concern expressed for the danger of vexatious litigation which could result from a widely expanded class of plaintiffs under Rule 10b-5 is founded in something more substantial than the common complaint of the many defendants who would prefer avoiding lawsuits entirely to either settling them or trying them. These concerns have two largely separate grounds.

The first of these concerns is that in the field of federal securities laws governing disclosure of information even a complaint which by objective standards may have very little chance of success at trial has a settlement value to the plaintiff out of any proportion to its prospect of success at trial so long as he may prevent the suit from being resolved against him by dismissal or summary judgment. The very pendency of the lawsuit may frustrate or delay normal business activity of the defendant which is totally unrelated to the lawsuit. See, e. g., Sargent, The SEC and the Individual Investor: Restoring His Confidence in the Market, 60 Ya. L. Rev. 553, 562-572 (1974); Dooley, The Effects of Civil Liability on Investment Banking and the New Issues Market, 58 Va. L. Rev. 776, 822-843 (1972).

Congress itself recognized the potential for nuisance or “strike” suits in this type of litigation, and in Title II of the 1934 Act amended § 11 of the 1933 Act to provide that:

“In any suit under this or any other section of this title the court may, in its discretion, require an undertaking for the payment of the costs of such suit, including reasonable attorney’s fees . . . .” § 206 (d), 48 Stat. 881, 908.

Senator Fletcher, Chairman of the Senate Banking and Finance Committee, in introducing Title II of the 1934 *741Act on the floor of the Senate, stated in explaining the amendment to § 11 (e): “This amendment is the most important of all.” 78 Cong. Rec. 8669. Among its purposes was to provide “a defense against blackmail suits.” Ibid.

Where Congress in those sections of the 1933 Act which expressly conferred a private cause of action for damages, adopted a provision uniformly regarded as designed to deter “strike” or nuisance actions, Cohen v. Beneficial Loan Corp., 337 U. S. 541, 548-549 (1949), that fact alone justifies our consideration of such potential in determining the limits of the class of plaintiffs who may sue in an action wholly implied from the language of the 1934 Act.

The potential for possible abuse of the liberal discovery provisions of the Federal Rules of Civil Procedure may likewise exist in this type of case to a greater extent than they do in other litigation. The prospect of extensive deposition of the defendant’s officers and associates and the concomitant opportunity for extensive discovery of business documents, is a common occurrence in this and similar types of litigation. To the extent that this process eventually produces relevant evidence which is useful in determining the merits of the claims asserted by the parties, it bears the imprimatur of those Rules and of the many cases liberally interpreting them. But to the extent that it permits a plaintiff with a largely groundless claim to simply take up the time of a number of other people, with the right to do so representing an in terrorem increment of the settlement value, rather than a reasonably founded hope that the process will reveal relevant evidence, it is a social cost rather than a benefit. Yet to broadly expand the class of plaintiffs who may sue under Rule 10b-5 would appear to encourage the least appealing aspect of the use of the discovery rules.

*742Without the Birnbaum rule, an action under Rule 10b-5 will turn largely on which oral version of a series of occurrences the jury may decide to credit, and therefore no matter how improbable the allegations of the plaintiff, the case will be virtually impossible to dispose of prior to trial other than by settlement. In the words of Judge Hufstedler’s dissenting opinion in the Court of Appeals:

“The great ease with which plaintiffs can allege the requirements for the majority’s standing rule and the greater difficulty that plaintiffs are going to have proving the allegations suggests that the majority’s rule will allow a relatively high proportion of ‘bad’ cases into court. The risk of strike suits is particularly high in such cases; although they are difficult to prove at trial, they are even more difficult to dispose of before trial.” 492 F. 2d, at 147 n. 9.

The Birnbaum rule, on the other hand, permits exclusion prior to trial of those plaintiffs who were not themselves purchasers or sellers of the stock in question. The fact of purchase of stock and the fact of sale of stock are generally matters which are verifiable by documentation, and do not depend upon oral recollection, so that failure to qualify under the Birnbaum rule is a matter that can normally be established by the defendant either on a motion to dismiss or on a motion for summary judgment.

Obviously there is no general legal principle that courts in fashioning substantive law should do so in a manner which makes it easier, rather than more difficult, for a defendant to obtain a summary judgment. But in this type of litigation, where the mere existence of an unresolved lawsuit has settlement value to the plaintiff not only because of the possibility that he may prevail on the merits, an entirely legitimate component of settlement value, but because of the threat of extensive dis*743covery and disruption of normal business activities which may accompany a lawsuit which is groundless in any event, but cannot be proved so before trial, such a factor is not to be totally dismissed. The Birnbaum rule undoubtedly excludes plaintiffs who have in fact been damaged by violations of Rule 10b-5, and to that extent it is undesirable. But it also separates in a readily demonstrable manner the group of plaintiffs who actually purchased or actually sold, and whose version of the facts is therefore more likely to be believed by the trier of fact, from the vastly larger world of potential plaintiffs who might successfully allege a claim but could seldom succeed in proving it. And this fact is one of its advantages.

The second ground for fear of vexatious litigation is based on the concern that, given the generalized contours of liability, the abolition of the Birnbaum rule would throw open to the trier of fact many rather hazy issues of historical fact the proof of which depended almost entirely on oral testimony. We in no way disparage the worth and frequent high value of oral testimony when we say that dangers of its abuse appear to exist in this type of action to a peculiarly high degree. The Securities and Exchange Commission, while opposing the adoption of the Birnbaum rule by this Court, states that it agrees with petitioners “that the effect, if any, of a deceptive practice on someone who has neither purchased nor sold securities may be more difficult to demonstrate than is the effect on a purchaser or seller.” Brief for the Securities and Exchange Commission as Amicus Curiae 24-25. The brief also points out that frivolous suits can be brought whatever the rules of standing, and reminds us of this Court’s recognition “in a different context” that “the expense and annoyance of litigation is 'part of the social burden of living under *744government.’ ” Id., at 24 n. 30., See Petroleum Exploration, Inc. v. Public Service Comm’n, 304 U. S. 209, 222 (1938). The Commission suggests that in particular cases additional requirements of corroboration of testimony and more limited measure of damages would correct the dangers of an expanded class of plaintiffs.

But the very necessity, or at least the desirability, of fashioning unique rules of corroboration and damages as a correlative to the abolition of the Birnbaum rule suggests that the rule itself may have something to be said for it.

In considering the policy underlying the Birnbaum rule, it is not inappropriate to advert briefly to the tort of misrepresentation and deceit, to which a claim under Rule 10b-5 certainly has some relationship. Originally under the common law of England such an action was not available to one other than a party to a business transaction. That limitation was eliminated in Pasley v. Freeman, 3 T. R. 51, 100 Eng. Rep. 450 (1789). Under the earlier law the misrepresentation was generally required to be one of fact, rather than opinion, but that requirement, too, was gradually relaxed. Lord Bowen’s famous comment in Edgington v. Fitzmaurice, [1882] L. R. 29 Ch. Div. 459, 483, that “the state of a man’s mind is as much a fact as the state of his digestion,” suggests that this distinction, too, may have been somewhat arbitrary. And it has long been established in the ordinary case of deceit that a misrepresentation which leads to a refusal to purchase or to sell is actionable in just the same way as a misrepresentation which leads to the consummation of a purchase or sale. Butler v. Watkins, 13 Wall. 456 (1872). These aspects of the evolution of the tort of deceit and misrepresentation suggest a direction away from rules such as Birnbaum.

But the typical fact situation in which the classic tort *745of misrepresentation and deceit evolved was light years away from the world of commercial transactions to which Rule 10b-5 is applicable. The plaintiff in Butler, supra, for example, claimed that he had held off the market a patented machine for tying cotton bales which he had developed by reason of the fraudulent representations of the defendant. But the report of the case leaves no doubt that the plaintiff and defendant met with one another in New Orleans, that one presented a draft agreement to the other, and that letters were exchanged relating to that agreement. Although the claim to damages was based on an allegedly fraudulently induced decision not to put the machines on the market, the plaintiff, and the defendant had concededly been engaged in the course of business dealings with one another, and would presumably have recognized one another on the street had they met.

In today’s universe of transactions governed by the 1934 Act, privity of dealing or even personal contact between potential, defendant and potential plaintiff is the exception and not the rule. The stock of issuers is listed on financial exchanges utilized by tens of millions of investors, and corporate representations reach a potential audience, encompassing not only the diligent few who peruse filed corporate reports or the sizable number of subscribers to financial journals, but the readership of the Nation’s daily newspapers. Obviously neither the fact that issuers or other potential defendants under Rule 10b-5 reach a large number of potential investors, or the fact that they are required by law to make their disclosures conform to certain standards, should in any way absolve them from liability for misconduct which is proscribed by Rule 10b-5.

But in the absence of the Birnbaum rule, it would be sufficient for a plaintiff to prove that he had failed to *746purchase or sell stock by reason of a defendant’s violation of Rule 10b-5. The manner in which the defendant’s violation caused the plaintiff to fail to act could be as a result of the reading of a prospectus, as respondent claims here, but it could just as easily come as a result of a claimed reading of information contained in the financial pages of a local newspaper. Plaintiff’s proof would not be that he purchased or sold stock, a fact which would be capable of documentary verification in most situations, but instead that he decided not to purchase or sell stock. Plaintiff’s entire testimony could be dependent upon uncorroborated oral evidence of many of the crucial elements of his claim, and still be sufficient to go to the jury. The jury would not even have the benefit of weighing the plaintiff’s version against the defendant’s version, since the elements to which the plaintiff would testify would be in many cases totally unknown and unknowable to the defendant. The very real risk in permitting those in respondent’s position to sue under Rule 10b-5 is that the door will be open to recovery of substantial damages on the part of one who offers only his own testimony to prove that he ever consulted a prospectus of the issuer, that he paid any attention to it, or that the representations contained in it damaged him.10 *747The virtue of the Birnbaum rule, simply stated, in this situation, is that it limits the class of plaintiffs to those who have at least dealt in the security to which the prospectus, representation, or omission relates. And their dealing in the security, whether by way of purchase or sale, will generally be an objectively demonstrable fact in an area of the law otherwise very much dependent upon oral testimony. In the absence of the Birnbaum doctrine, bystanders to the securities marketing process could await developments on the sidelines without risk, claiming that inaccuracies in disclosure caused nonselling in a falling market and that unduly pessimistic predictions by the issuer followed by a rising market caused them to allow retrospectively golden opportunities to pass.

While much of the development of the law of deceit has been the elimination of artificial barriers to recovery on just claims' we are not the first court to express concern that the inexorable broadening of the class of plain*748tiff who may sue in this area of the law will ultimately result in more harm than good. In Ultramares Corp. v. Touche, 255 N. Y. 170, 174 N. E. 441 (1931), Chief Judge Cardozo observed with respect to “a liability in an indeterminate amount for an indeterminate time to an indeterminate class”:

“The hazards of a business conducted on these terms are so extreme as to enkindle doubt whether a flaw may not exist in the implication of a duty that exposes to these consequences.” Id., at 179-180, 174 N. E., at 444.

In Herpich v. Wallace, 430 F. 2d 792, 804-805 (CA5 1970), a case adopting the Birnbaum limitation on the class of plaintiffs who might bring an action for damages based on a violation of Rule 1 Ob-5, Judge Ainsworth expressed concern similar to that expressed by Chief Judge Cardozo. Judge Stevens, writing in Eason v. General Motors Acceptance Corp., 490 F. 2d, at 660, stated that court’s view that these concerns were unduly emphasized, and went on to say that “we may not for that reason reject what we believe to be a correct interpretation of the statute or the rule.” He relied in part on the view that Rule 10b-5 should be interpreted, in keeping with this Court’s repeated admonition, “ ‘not technically and restrictively, but flexibly to effectuate its remedial purposes.’ ” Affiliated Ute Citizens v. United States, 406 U. S., at 151.

We quite agree that if Congress had legislated the elements of a private cause of action for damages, the duty of the Judicial Branch would be to administer the law which Congress enacted; the Judiciary may not circumscribe a right which Congress has conferred because of any disagreement it might have with Congress about the wisdom of creating so expansive a liability. But as we have pointed out, we are not dealing here with *749any private right created by the express language of § 10 (b) or of Rule 10b-5. No language in either of those provisions speaks at all to the contours of a private cause of action for their violation. However flexibly we may construe the language of both provisions, nothing in such construction militates against the Birnbaum rule. We are dealing with a private cause of action which has been judicially found to exist, and which will have to be judicially delimited one way or another unless and until Congress addresses the question. Given the peculiar blend of legislative, administrative, and judicial history which now surrounds Rule 10b-5, we believe that practical factors to which we have adverted, and to which other courts have referred, are entitled to a good deal of weight.

Thus we conclude that what may be called considerations of policy, which we are free to weigh in deciding this case, are by no means entirely on one side of the scale. Taken together with the precedential support for the Birnbaum rule over a period of more than 20 years, and the consistency of that rule with what we can glean from the intent of Congress, they lead us to conclude that it is a sound rule and should be followed.

IV

The majority of the Court of Appeals in this case expressed no disagreement with the general proposition that one asserting a claim for damages based on the violation of Rule 10b-5 must be either a purchaser or seller of securities. However, it noted that prior cases have held that persons owning contractual rights to buy or sell securities are not excluded by the Birnbaum rule. Relying on these cases, it concluded that respondent’s status as an offeree pursuant to the terms of the consent decree served the same function, for purposes *750of delimiting the class of plaintiffs, as is normally performed by the requirement of a contractual relationship. 492 F. 2d, at 142.

The Court of Appeals recognized, and respondent concedes here,11 that a well-settled line of authority from this Court establishes that a consent decree is not enforceable directly or in collateral proceedings by those who are not parties to it even though they were intended to be benefited by it. United States v. Armour & Co., 402 U. S. 673 (1971); Buckeye Co. v. Hocking Valley Co., 269 U. S. 42 (1925).12

A contract to purchase or sell securities is expressly defined by § 3 (a) of the 1934 Act, 15 U. S. C. § 78c (a),13 *751as a purchase or sale of securities for the purposes of that Act. Unlike respondent, which had no contractual right or duty to purchase Blue Chip’s securities, the holders of puts, calls, options, and other contractual rights or duties to purchase or sell securities have been recognized as “purchasers” or “sellers” of securities for purposes of Rule 10b-5, not because of a judicial conclusion that they were similarly situated to “purchasers” or “sellers,” but because the definitional provisions of the 1934 Act themselves grant them such a status.

Even if we were to accept the notion that the Birnbaum, rule could be circumvented on a case-by-case basis through particularized judicial inquiry into the facts surrounding a complaint, this respondent arid the members of its alleged class would be unlikely candidates for such a judicially created exception. While the Birnbaum rule has been flexibly interpreted by lower federal courts,14 we have been unable to locate a single decided case from any court in the 20-odd years of litigation since the Birnbaum decision which would support the right of persons who were in the position of respondent here to bring a private suit under Rule 10b-5. Respondent was not only not a buyer or seller of any security *752but it was not even a shareholder of the corporate petitioners.

As indicated, the 1934 Act, under which respondent seeks to assert a cause of action, is general in scope but chiefly concerned with the regulation of post-distribution trading on the Nation’s stock exchanges and securities trading markets. The 1933 Act is a far narrower statute chiefly concerned -with disclosure and fraud in connection with offerings of securities — primarily, as here, initial distributions of newly issued stock from corporate issuers. 1 L. Loss, Securities Regulation 130-131 (2d ed. 1961). Respondent, who derives no entitlement from the antitrust consent decree and does not otherwise possess any contractual rights relating to the offered stock, stands in the same position as any other disappointed offeree of a stock offering registered under the 1933 Act who claims that an overly pessimistic prospectus, prepared and distributed as required by §§ 5 and 10 of the 1933 Act, has caused it to allow its opportunity to purchase to pass.

There is strong evidence that application of the Birnbaum rule to preclude suit by the disappointed offeree of a registered 1933 Act offering under Rule 10b-5 furthers the intention of Congress as expressed in the 1933 Act.15 Congress left little doubt that its purpose in imposing the prospectus and registration requirements of the 1933 Act was to prevent the “[h]igh pressure salesmanship rather than careful counsel,” causing inflated *753new issues, through direct limitation by the SEC of “the selling arguments hitherto employed.” H. R. Rep. No. 85, 73d Cong., 1st Sess., 2, 8 (1933).

“Any objection that the compulsory incorporation in selling literature and sales argument of substantially all information concerning the issue, will frighten the buyer with the intricacy of the transaction, states one of the best arguments for the provision.” Id., at 8.

The SEC, in accord with the congressional purposes, specifically requires prominent emphasis be given in filed registration statements and prospectuses to material adverse contingencies. See, e. g., SEC Securities Act Release No. 4936, Guides for the Preparation and Filing of Registration Statements 6, ¶ 6 (1968); In re Universal Camera Corp., 19 S. E. C. 648, 654-656 (1945); Wheat & Blackstone, Guideposts for a First Public Offering, 15 Bus. Law. 539, 560-562 (1960).

Sections 11 and 12 of the 1933 Act provide express civil remedies for misrepresentations and omissions in registration statements and prospectuses filed under the Act, as here charged, but restrict recovery to the offering priee of shares actually purchased:

“To impose a greater responsibility, apart from constitutional doubts, would unnecessarily restrain the conscientious administration of honest business with no compensating advantage to the public.” H. R. Rep. No. 85, supra, at 9.

And in Title II of the 1934 Act, 48 Stat. 905-908, the same Act adopting § 10 (b), Congress amended § 11 of the 1933 Act to limit still further the express civil remedy it conferred. See generally James, Amendments to the Securities Act of 1933, 32 Mich. L. Rev. 1130, 1134 (1934). The additional congressional restrictions, *754contained in Title II of the 1934 Act, on the already limited express civil remedies provided by the 1933 Act for misrepresentations or omissions in a registration statement or prospectus reflected congressional concern over the impact of even these limited remedies on the new issues market. 78 Cong. Rec. 8668-8669 (1934). There is thus ample evidence that Congress did not intend to extend a private cause of action for money damages to the nonpurchasing offeree of a stock offering registered under the 1933 Act for loss of the opportunity to purchase due to an overly pessimistic prospectus.

Beyond the difficulties evident in an extension of standing to this respondent, we do not believe that the Bimbaum rule is merely a shorthand judgment on the nature of a particular plaintiff’s proof. As a purely practical matter, it is doubtless true that respondent and the members of its class, as offerees and recipients of the prospectus of New Blue Chip, are a smaller class of potential plaintiffs than would be all those who might conceivably assert that they obtained information violative of Rule 10b-5 and attributable to the issuer in the financial pages of their local newspaper. And since respondent likewise had a prior connection with some of petitioners as a result of using the trading stamps marketed by Old Blue Chip, and was intended to benefit from the provisions of the consent decree, there is doubtless more likelihood that its managers read and were damaged by the allegedly misleading statements in the prospectus than there would be in a case filed by a complete stranger to the corporation.

But respondent and the members of its class are neither “purchasers” nor “sellers,” as those terms are defined in the 1934 Act, and therefore to the extent that their claim of standing to sue were recognized, it would mean that the lesser practical difficulties of corroborating *755at least some elements of their proof would be regarded as sufficient to avoid the Birnbaum rule. While we have noted that these practical difficulties, particularly in the case of a complete stranger to the corporation, support the retention of that rule, they are by no means the only factor which does so. The general adoption of the rule by other federal courts in the 25 years since it was announced, and the consistency of the rule with the statutes involved and their legislative history, are likewise bases for retaining the rule. Were we to agree with the Court of Appeals in this case, we would leave the Birnbaum rule open to endless case-by-case erosion depending on whether a particular group of plaintiffs was thought by the court in which the issue was being litigated to be sufficiently more discrete than the world of potential purchasers at large to justify an exception. We do not believe that such a shifting and highly fact-oriented disposition of the issue of who may bring a damages claim for violation of Rule 10b-5 is a satisfactory basis for a rule of liability imposed on the. conduct of business transactions. Nor is it as consistent as a straightforward application of the Birnbaum rule with the other factors which support the retention of that rule. We therefore hold that respondent was not entitled to sue for violation of Rule 10b-5, and the judgment of the Court of Appeals is

Reversed.

Mr. Justice Powell,

with whom Mr. Justice Stewart and Mr. Justice Marshall join, concurring.

Although I join the opinion of the Court, I write to emphasize the significance of the texts of the Acts of 1933 and 1934 and especially the language of § 10 (b) and Rule 10b-5.

*756I

The starting point in every case involving construction of a statute is the language itself. The critical phrase in both the statute and the Rule is “in connection with the purchase or sale of any security.” 15 U. S. C. § 78j (b); 17 CFR § 240.10b-5 (1975) (emphasis added). Section 3 (a) (14) of the 1934 Act, 15 U. S. C. § 78c (a) (14), provides that the term “sale” shall “include any contract to sell or otherwise dispose of” securities. There is no hint in any provision of the Act that the term “sale,” as used in § 10 (b), was intended — in addition to its long-established legal meaning — to include an “offer to sell.” Respondent, nevertheless, would have us amend the controlling language in § 10 (b) to read:

“in connection with the purchase or sale of, or an offer to sell, any security.”

Before a court properly could consider taking such liberty with statutory language there should be, at least, unmistakable support in the history and structure of the legislation. None exists in this case.

Nothing in the history of the 1933 and 1934 Acts supports any congressional intent to include mere offers in § 10 (b). Moreover, as the Court’s opinion indicates, impressive evidence in the texts of the two Acts demonstrates clearly that Congress selectively and carefully distinguished between offers, purchases, and sales. For example, § 17 (a), the antifraud provision of the 1933 Act, 15 U. S. C. § 77q (a), expressly includes “offer[s]” of securities within its terms while § 10 (b) of the 1934 Act and Rule 10b-5 do not. The 1933 Act also defines “offer to sell” as something distinct from a sale. § 2 (3), 15 U. S. C. § 77b (3).

If further evidence of congressional intent were needed, it may be found in the subsequent history of these Acts. *757As noted in the Court’s opinion, the Securities and Exchange Commission unsuccessfully sought, in 1957 and again in 1959, to persuade Congress to broaden § 10 (b) by adding to the critical language: “or any attempt to purchase or sell” any security. See ante, at 732.

This case involves no “purchase or sale” of securities.1 Respondent was a mere offeree, which instituted this suit some two years after the shares were issued and after the market price had soared. Having “missed the market” on a stock, it is hardly in a unique position. The capital that fuels our enterprise system comes from investors who have frequent opportunities to purchase, or not to purchase, securities being offered publicly. The market prices of new issues rarely remain static: almost invariably they go up or down, and they often fluctuate widely over a period far less than the two years during which respondent reflected on its lost opportunity. Most investors have unhappy memories of decisions not to buy stocks which later performed well.

The opinion of the Court, and the dissenting opinion of Judge Hufstedler in the Court of Appeals, correctly emphasize the subjective nature of the inevitable inquiry if the term “offer” were read into the Act and some arguable error could be found in an offering prospectus: “Would I have purchased this particular security at the time it was offered if I had known the correct facts?” Apart from the human temptation for the plaintiff to answer this question in a self-serving fashion, the offeror *758of the securities — defendant in the suit — is severely handicapped in challenging the predictable testimony.2 The subjective issues would be even more speculative in the class actions that inevitably would follow if we held that offers to sell securities are covered by § 10 (b) and Rule 10b-5.

In this case respondent was clearly identifiable as an offeree, as here the shares were offered to designated persons.3 In the more customary public sale of securities, identification of those who in fact were bona fide offerees would present severe problems of proof. The 1933 Act requires that offers to sell registered securities be made by means of an effective prospectus. § 5 (b), 15 U. S. C. §77e(b). Issues are usually marketed through underwriters and dealers, often including scores of investment banking and brokerage firms across the country. Copies of the prospectus may be widely distributed through the dealer group, and then passed hand to hand among countless persons whose identities cannot be known. If § 10 (b) were extended to embrace offers to sell, the number of persons claiming to have been *759offerees could be legion with respect to any security that subsequently proved to be a rewarding investment.

We are entitled to assume that the Congress, in enacting § 10 (b) and in subsequently declining to extend it, took into account these and similar considerations. The courts already have inferred a private cause of action that was not authorized by the legislation. In doing this, however, it was unnecessary to rewrite the precise language of § 10 (b) and Rule 10b-5. This is exactly what respondent — joined, surprisingly, by the SEC— sought in this case.4 If such a far-reaching change is to *760be made, with unpredictable consequences for the process of raising capital so necessary to our économic well-being, it is a matter for the Congress, not the courts.

II

Mr. Justice Blackmun’s dissent charges the Court with “a preternatural solicitousness for corporate well-being and a seeming callousness toward the investing public.” Our task in this case is to construe a statute. In my view, the answer is plainly compelled by the language as well as the legislative history of the 1933 and 1934 Acts. But even if the language is not “plain” to all, I would have thought none could doubt that the statute can be read fairly to support the result the Court reaches. Indeed, if one takes a different view — and imputes callousness to all who disagree — he must attribute a lack of legal and social perception to the scores of federal judges who have followed Birnbaum for two decades.

The dissenting opinion also charges the Court with paying “no heed to the unremedied wrong” arising from the type of “fraud” that may result from reaffirmance of the Birnbaum rule. If an issue of statutory construction is to be decided on the basis of assuring a federal remedy — in addition to state remedies — for every perceived fraud, at least we should strike a balance between the opportunities for fraud presented by the contending views. It may well be conceded that Birnbaum does allow some fraud to go unremedied under the federal securities Acts. But the construction advocated by the dissent could result in wider opportunities for fraud. As the Court’s opinion makes plain, abandoning the Birnbaum construction in favor of the rule urged by the dissent would invite any person who failed to purchase a *761newly offered security that subsequently enjoyed substantial market appreciation to file a claim alleging that the offering prospectus understated the company’s potential. The number of possible plaintiffs with respect to a public offering would be virtually unlimited. As noted above (at 758 n. 2), an honest offeror could be confronted with subjective claims by plaintiffs who had neither purchased its securities nor seriously considered the investment. It frequently would be impossible to refute a plaintiff’s assertion that he relied on the prospectus, or even that he made a decision not to buy the offered securities. A rule allowing this type of open-ended litigation would itself be an invitation to fraud.5

Mb. Justice Blackmun,

with whom Me. Justice Douglas and Mb. Justice Bbennan join, dissenting.

Today the Court graves into stone Birnbaum’s 1 arbitrary principle of standing. For this task the Court, unfortunately, chooses to utilize three blunt chisels: (1) reliance on the legislative history of the 1933 and *7621934 Securities Acts, conceded as inconclusive in this particular context; (2) acceptance as precedent of two decades of lower court decisions following a doctrine, never before examined here, that was pronounced by a justifiably esteemed panel of that Court of Appeals regarded as the “Mother Court” in this area of the law,2 but under entirely different circumstances; and (3) resort to utter pragmatically and a conjectural assertion of “policy considerations” deemed to arise in distinguishing the meritorious Rule 10b-5 suit from the meretricious one. In so doing, the Court exhibits a preternatural solicitousness for corporate well-being and a seeming callousness toward the investing public quite out of keeping, it seems to me, with our own traditions and the intent of the securities laws. See Affiliated Ute Citizens v. United States, 406 U. S. 128, 151 (1972); Superintendent of Insurance v. Bankers Life & Cas. Co., 404 U. S. 6, 12 (1971); SEC v. National Securities, Inc., 393 U. S. 453, 463 (1969); Tcherepnin v. Knight, 389 U. S. 332, 336 (1967); SEC v. Capital Gains Bureau, 375 U. S. 180, 195 (1963).

The plaintiff’s complaint — and that is all that is before us now — raises disturbing claims of fraud. It alleges that the directors of “New Blue Chip” and the majority shareholders of “Old Blue Chip” engaged in a deceptive and manipulative scheme designed to subvert the intent of the 1967 antitrust consent decree and to enhance the value of their own shares in a subsequent offering. Although the complaint is too long to reproduce here, see App. 4-22, the plaintiff, in short, contends that the much-negotiated plan of reorganization of Old Blue *763Chip, pursuant to the decree and approved by the District Court, was intended to compensate former retailer-users of Blue Chip stamps for damages suffered as a result of the antitrust violations. Accordingly, the majority shareholders were to be divested of 55% of their interest; Old Blue Chip was to be merged into a new company; and 55% of the common shares of the new company were to be offered to the former users on a pro rata basis, determined by the quantity of stamps issued to each of these nonshareholding users during a designated period. Some 621,000 shares were thus to be offered in units, each consisting of three shares of common and a $100 debenture, in return for $1Q1 cash.

It is the plaintiff’s pleaded position that this offer to the former users was intended by the antitrust court and the Government to be a “bargain,” since the then reasonable market value of each unit was actually $315. The plaintiff alleged, however, that the offering shareholders had no intention of complying in good faith with the terms of the consent decree and of permitting the former users of Blue Chip stamps to obtain the bargain offering. Rather, they conspired to dissuade the offerees from purchasing the units by including substantially misleading and negative information in the prospectus under the heading “Items of Special Interest.” The prospectus contained the following statements, allegedly false ánd allegedly made to deter the plaintiff and its class from purchasing the units: (1) that “[n]et income for the current fiscal year will be adversely affected by payments aggregating $8,486,000 made since March 2,1968 in settlement of claims” against New Blue Chip; (2) that net income “would be adversely affected by a substantial decrease in the use of the Company’s trading stamp service”; (3) that net income “would be adversely affected by a sale of one-third of the Company’s trading stamp *764business in California”; (4) that “Claims or Causes of Action (as defined) against the Company, including prayers for treble damages, now aggregate approximately $29,000,000”; and (5) that, based upon “statistical evaluations,” “the Company presently estimates that 97.5% of all stamps issued will ultimately be redeemed.” App. 56, 66.

Plaintiff alleged that these negative statements were known, or should have been known, by the defendants to be false since, for example, the $29,000,000 in purported legal claims were settled for less than $1,000,000 only three months later, and, as a historical fact, less than 90% of all trading stamps are redeemed. Importantly, when the defendants offered their own shares for sale to the public a year later, the prospectus issued at that time made no reference to these factors even though, to the extent that they were relevant on the date of the first prospectus, one year earlier, they would have been equally relevant on the date of the second. As a result of the defendants’ negative statements, plaintiff claims that it and its class were dissuaded from exercising their option to purchase Blue Chip shares and that they were damaged accordingly.

From a reading of the complaint in relation to the language of § 10 (b) of the 1934 Act and of Rule 10b-5, it is manifest that plaintiff has alleged the use of a deceptive scheme “in connection with the purchase or sale of any security.” To my mind, the word “sale” ordinarily and naturally may be understood to mean, not only a single, individualized act transferring property from one party to another, but also the generalized event of public disposal of property through advertisement, auction, or some other market mechanism. Here, there is an obvious, indeed a court-ordered, “sale” of securities in the special offering of New Blue Chip shares and debentures to former users. Yet the Court denies this *765plaintiff the right to maintain a suit under Rule 10b-5 because it does not fit into the mechanistic categories of either “purchaser” or “seller.” This, surely, is an anomaly, for the very purpose of the alleged scheme was to inhibit this plaintiff from ever acquiring the status of “purchaser.” Faced with this abnormal divergence from the usual pattern of securities frauds, the Court pays no heed to the unremedied wrong or to the portmanteau nature of § 10 (b).

The broad purpose and scope of the Securities Exchange Act of 1934 are manifest. Senator Fletcher, Chairman of the Senate Committee on Banking and Currency, in introducing S. 2693, the bill that became the 1934 Act, reviewed the general purposes of the legislation:

“Manipulators who have in the past had a comparatively free hand to befuddle and fool the public and to extract from the public millions of dollars through stock-exchange operations are to be curbed and deprived of the opportunity to grow fat on the savings of the average man and woman of America. Under this bill the securities exchanges will not only have the appearance of an open market place for investors but will be truly open to them, free from the hectic operations and dangerous practices which in the past have enabled a handful of men to operate with stacked cards against the general body of the outside investors. For example, besides forbidding fraudulent practices and unwholesome manipulations by professional market operators, the bill seeks to deprive corporate directdrs, corporate officers, and other corporate insiders of the opportunity to play the stocks of their companies against the interests of the stockholders of their companies.” 78 Cong. Rec. 2271 (1934).

*766The Senator went on to describe the function of each of the many provisions of the bill, including § 9 (c) which, without significant alteration, became § 10 (b) of the Act. He said, as to this section, in terms that surely are broad:

“The Commission is also given power to forbid any other devices in connection with security transactions which it finds detrimental to the public interest or to the proper protection of investors.” Ibid.

Similarly, the broad scope of the identical provision in the House version of the bill was emphasized by one of the principal draftsmen, in testimony before the House Committee on Interstate and Foreign Commerce. Summing up § 9 (c), he stated:

“Subsection (c) says, 'Thou shalt not devise any other cunning devices.’

“. . . Of course subsection (c) is a catch-all clause to prevent manipulative devices[.] I do not think there is any objection to that kind of a clause. The Commission should have the authority to deal with new manipulative devices.” Testimony of Thomas G. Corcoran, Hearing on H. R. 7852 and H. R. 8720 before the House Committee on Interstate and Foreign Commerce, 73d Cong., 2d Sess., 115 (1934).

In adopting Rule 10b-5 in 1942, the Securities and Exchange Commission issued a press release stating: “The new rule closes a loophole in the protections against fraud administered by the Commission by prohibiting individuals or companies from buying securities if they engage in fraud in their purchase.” SEC Release No. 3230 (May 21, 1942). To say specifically that certain types of fraud are within Rule 10b-5, of course, is not to say that others are necessarily excluded. That this *767is so is confirmed by the apparently casual origins of the Rule, as recalled by a former SEC staff attorney in remarks- made at a conference on federal securities laws several years ago:

“It was one day in the year 1943, I believe. I was sitting in my office in the S. E. C. building in Philadelphia and I received a call from Jim Treanor who was then the Director of the Trading and Exchange Division. He said, ‘I have just been on the telephone with Paul Rowen,’ who was then the S. E. C. Regional Administrator in Boston, ‘and he has told me about the president of some company in Boston who is going around buying up the stock of his company from his own shareholders at $4.00 a share, and he has been telling them that the company is doing very badly, whereas, in fact, the earnings are going to be quadrupled and will be $2.00 a share for this coming year. Is there anything we can do about it?’ So he came upstairs and I called in my secretary and I looked at Section 10 (b) and I looked at Section 17, and I put them together, and the only discussion we had there was where ‘in connection with the purchase or sale’ should be, and we decided it should be at the end.

“We called the Commission and we got on the calendar, and I don’t remember whether we got there that morning or after lunch. We passed a piece of paper around to all the commissioners. All the commissioners read the rule and they tossed it on the table, indicating approval. Nobody said anything except Sumner Pike who said, ‘Well,’ he said, ‘we are against fraud, aren’t we?’ That is how it happened.” Remarks of Milton Freeman, Conference on Codification of the Federal Securities Laws, 22 Bus. Law. 793, 922 (1967).

*768The question under both Rule 10b-5 and its parent statute, § 10 (b), is whether fraud was employed — and the language is critical — by “any person ... in connection with the purchase or sale of any security.” On the allegations here, the nexus between the asserted fraud and the conducting of a “sale” is obvious and inescapable, and no more should be required to sustain the plaintiff’s complaint against a motion to dismiss.

The fact situation in Birnbaum, itself, of course, is far removed from that now before the Court, for there the fundament of the complaint was that the controlling shareholder had misrepresented the circumstances of an attractive merger offer and then, after rejecting the merger, had sold his controlling shares at a price double their then market value to a corporation formed by 10 manufacturers who wished control of a captive source’s supply when there was a market shortage. The Second Circuit turned aside an effort by small shareholders to bring this claim of breach of fiduciary duty under Rule 10b-5 by concluding that the Rule and § 10 (b) protected only those who had bought or had sold securities.

Many cases applying the Birnbaum doctrine and continuing critical comments from the academic world3 fol*769lowed in its wake, but until today the Court remained serenely above the fray.

To support its decision to adopt the Birnbaum doctrine, the Court points to the “longstanding acceptance by the courts” and to “Congress’ failure to reject Birnbaum’s reasonable interpretation of the wording of § 10 (b).” Ante, at 733. In addition, the Court purports to find support in “evidence from the texts of the 1933 and 1934 Acts,” although it concedes this to be “not conclusive.” Ibid. But the greater portion of the Court’s opinion is devoted to its discussion of the “danger of vexatiousness,” ante, at 739, that accompanies litigation under Rule 10b-5 and that is said to be “different in degree and in kind from that which accompanies litigation in general.” Ibid. It speaks of harm from the “very pendency of the lawsuit,” ante, at 740, something like the recognized dilemma of the physician sued for malpractice; of the “disruption of normal business activities which may accompany a lawsuit,” ante, at 743; and of “proof . . . which depend [s] almost entirely on oral testimony,” ibid., as if all these were unknown to lawsuits taking place in America’s courthouses every day. In. turning to, and being influenced by, these “policy considerations,” ante, at 737, or these “considerations of policy,” ante, at 749, the Court, in my view, unfortunately mires itself in speculation and conjecture *770not usually seen in its opinions. In order to support an interpretation that obviously narrows a provision of the securities laws designed to be a “catch-all,” the Court takes alarm at the “practical difficulties,” ante, at 754,755, that would follow the removal of Birnbaum’?, barrier.

Certainly, this Court must be aware of the realities of life, but it is unwarranted for the Court to take a form of attenuated judicial notice of the motivations that defense counsel may have in settling a case, or of the difficulties that a plaintiff may have in proving his claim.

Perhaps it is true that more cases that come within the Birnbaum doctrine can be properly proved than those that fall outside it. But this is no reason for denying standing to sue to plaintiffs, such as the one in this case, who allegedly are injured by novel forms of manipulation. We should be wary about heeding the seductive call of expediency and about substituting convenience and ease of processing for the more difficult task of separating the genuine claim from the unfounded one.

Instead of the artificiality of Birnbaum, the essential test of a valid Rule 10b-5 claim, it seems to me, must be the showing of a logical nexus between the alleged fraud and the sale or. purchase of a security. It is inconceivable that Congress could have intended a broad-ranging antifraud provision, such as § 10 (b), and, at the same time, have intended to impose, or be deemed to welcome, a mechanical overtone and requirement such as the Birnbaum doctrine. The facts of this case, if proved and accepted by the factfinder, surely are within the conduct that Congress intended to ban. Whether this particular plaintiff, or any plaintiff, will be able eventually to carry the burdens of proving fraud and of proving reliance and damage — that is, causality and injury — is a matter that should not be left to specula*771tions of “policy” of the kind now advanced in this forum so far removed from witnesses and evidence.

Finally, I am uneasy about the type of precedent the present decision establishes. Policy considerations can be applied and utilized in like fashion in other situations. The acceptance of this decisional route in this case may well come back to haunt us elsewhere before long. I would decide the case to fulfill the broad purpose that the language of the statutes and the legislative history dictate, and I would avoid the Court’s pragmatic solution resting upon a 20-odd-year-old, severely criticized doctrine enunciated for a factually distinct situation.

In short, I would abandon the Birnbaum doctrine as a rule of decision in favor of a more general test of nexus, just as the Seventh Circuit did in Eason v. General Motors Acceptance Corp., 490 F. 2d 654, 661 (1973), cert. denied, 416 U. S. 960 (1974). I would not worry about any imagined inability of our federal trial and appellate courts to control the flowering of the types of cases that the Court fears might result. Nor would I yet be disturbed about dire consequences that a basically pessimistic attitude foresees if the Birnbaum doctrine were allowed quietly to expire. Sensible standards of proof and of demonstrable damages would evolve and serve to protect the worthy and shut out the frivolous.

OPINION OF THE COURT

[563 U.S. 30]

Justice Sotomayor

delivered the opinion of the Court.

This case presents the question whether a plaintiff can state a claim for securities fraud under § 10(b) of the Securities Exchange Act of 1934, 48 Stat. 891, as amended, 15 U.S.C. § 78j(b), and Securities and Exchange Commission (SEC) Rule 10b-5, 17 CFR § 240.10b-5 (2010), based on a pharmaceutical company’s failure to disclose reports of adverse events associated with a product if the reports do not disclose a statistically significant number of adverse events. Respondents, plaintiffs in a securities fraud class action, allege that petitioners, Matrixx Initiatives, Inc., and three of its executives (collectively Matrixx), failed to disclose reports of a possible link between Ma-trixx’s leading product, a cold remedy, and loss of smell, rendering statements made by Matrixx misleading. Matrixx contends that respondents’ complaint does not adequately allege that Matrixx made a material representation or omission or that it acted with scienter because the complaint does not allege that Matrixx knew of a statistically significant number of adverse events requiring disclosure. We conclude that the materiality of adverse event reports cannot be reduced to a bright-line rule. Although in many cases reasonable investors would not consider

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reports of adverse events to be material information, respondents have alleged facts plausibly suggesting that reasonable investors would have viewed these particular reports as material. Respondents have also alleged facts “giving rise to a strong inference” that Matrixx “acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(2)(A) (2006 ed., Supp. IV). We therefore hold, in agreement with the *405Court of Appeals for the Ninth Circuit, that respondents have stated a claim under § 10(b) and Rule 10b-5.

I

A

Through a wholly owned subsidiary, Matrixx develops, manufactures, and markets over-the-counter pharmaceutical products. Its core brand of products is called Zicam. All of the products sold under the name Zicam are used to treat the common cold and associated symptoms. At the time of the events in question, one of Ma-trixx’s products was Zicam Cold Remedy, which came in several forms including nasal spray and gel. The active ingredient in Zicam Cold Remedy was zinc gluconate. Respondents allege that Zicam Cold Remedy accounted for approximately 70 percent of Matrixx’s sales.

Respondents initiated this securities fraud class action against Ma-trixx on behalf of individuals who purchased Matrixx securities between October 22, 2003, and February 6, 2004.1 The action principally arises out of statements that Matrixx made during the class period relating to revenues and product safety. Respondents claim that Matrixx’s statements were misleading in light of reports that Matrixx had received, but did not disclose, about consumers who had lost their sense of smell (a condition called anosmia) after using Zicam Cold Remedy. Respondents’ consolidated amended

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complaint alleges the following facts, which the courts below properly assumed to be true. See Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009).

In 1999, Dr. Alan Hirsch, neurological director of the Smell & Taste Treatment and Research Foundation, Ltd., called Matrixx’s customer service line after discovering a possible link between Zicam nasal gel and a loss of smell “in a cluster of his patients.” App. 67a-68a. Dr. Hirsch told a Matrixx employee that “previous studies had demonstrated that intra-nasal application of zinc could be problematic.” Id., at 68a. He also told the employee about at least one of his patients who did not have a cold and who developed anosmia after using Zicam.

In September 2002, Timothy Clarot, Matrixx’s vice president for research and development, called Miriam Linschoten, Ph.D., at the University of Colorado Health Sciences Center after receiving a complaint from a person Linschoten was treating who had lost her sense of smell after using Zicam. Clarot informed Linschoten that Matrixx had received similar complaints from other customers. Linschoten drew Clarot’s attention to “previous studies linking zinc sulfate to loss of smell.” Ibid. Clarot gave her the impression that he had not heard of the studies. She asked Clarot whether Matrixx had done any studies of its own; he responded that it had not but that it had hired a consultant to review the product. Soon thereafter, Linschoten sent Clarot abstracts of the studies she had mentioned. Research from the 1930’s and 1980’s had confirmed “[z]inc’s toxicity.” Id., at 69a. Clarot called Linschoten to ask whether she would be willing to participate in animal studies that Matrixx was planning, but she declined because her focus was human research.

*406By September 2003, one of Linscho-ten’s colleagues at the University of Colorado, Dr. Bruce Jafek, had observed 10 patients suffering from an-osmia after Zicam use. Linschoten and Jafek planned to present their findings at a meeting

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of the American Rhinologic Society in a poster presentation entitled “Zicam® Induced Anos-mia.” Ibid, (internal quotation marks omitted). The American Rhinologic Society posted their abstract in advance of the meeting. The presentation described in detail a 55-year-old man with previously normal taste and smell who experienced severe burning in his nose, followed immediately by a loss of smell, after using Zicam. It also reported 10 other Zicam users with similar symptoms.

Matrixx learned of the doctors’ planned presentation. Clarot sent a letter to Dr. Jafek warning him that he did not have permission to use Matrixx’s name or the names of its products. Dr. Jafek deleted the references to Zicam in the poster before presenting it to the American Rhino-logic Society.

The following month, two plaintiffs commenced a product liability lawsuit against Matrixx alleging that Zicam had damaged their sense of smell. By the end of the class period on February 6, 2004, nine plaintiffs had filed four lawsuits.

Respondents allege that Matrixx made a series of public statements that were misleading in light of the foregoing information. In October 2003, after it had learned of Dr. Jafek’s study and after Dr. Jafek had presented his findings to the American Rhinologic Society, Matrixx stated that Zicam was “ ‘poised for growth in the upcoming cough and cold season’ ” and that the company had “ ‘very strong momentum.’ ”2 Id., at 72a-74a. Matrixx further expressed its expectation that revenues would “ ‘be up in excess of 50% and that earnings, per share for the full year [would] be in the 25 to 30 cent range.’ ” Id., at 74a. In January 2004, Matrixx raised

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its revenue guidance, predicting an increase in revenues of 80 percent and earnings per share in the 33- to 38-cent range.

In its Form 10-Q filed with the SEC in November 2003, Zicam warned of the potential “ ‘material adverse effect’ ” that could result from product liability claims, “ ‘whether or not proven to be valid.’ ” Id., at 75a-76a. It stated that product liability actions could materially affect Matrixx’s “ ‘product branding and goodwill,’ ” leading to reduced customer acceptance.3 Id., at 76a. It did not disclose, however, that two plaintiffs had already sued Matrixx for allegedly causing them to lose their sense of smell.

On January 30, 2004, Dow Jones Newswires reported that the Food and Drug Administration (FDA) was “ ‘looking into complaints that an over-the-counter common-cold medicine manufactured by a unit of Ma-trixx Initiatives, Inc. (MTXX) may be causing some users to lose their sense *407of smell’ ” in light of at least three product liability lawsuits. Id., at 79a-80a. Matrixx’s stock fell from $13.55 to $11.97 per share after the report. In response, on February 2, Matrixx issued a press release that stated:

“A11 Zicam products are manufactured and marketed according to FDA guidelines for homeopathic medicine. Our primary concern is the health and safety of our customers and the distribution of factual information about our products. Matrixx believes statements alleging that intranasal Zicam products cause anosmia (loss of smell) are completely unfounded and misleading.

“In no clinical trial of intranasal zinc gluconate gel products has there been a single report of lost or diminished olfactory function (sense of smell). Rather, the safety and efficacy of zinc gluconate for the treatment of symptoms related to the common cold have been well

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established in two double-blind, placebo-controlled, randomized clinical trials. In fact, in neither study were there any reports of anosmia related to the use of this compound. The overall incidence of adverse events associated with zinc gluconate was extremely low, with no statistically significant difference between the adverse event rates for the treated and placebo subsets.

“A multitude of environmental and biologic influences are known to affect the sense of smell. Chief among them is the common cold. As a result, the population most likely to use cold remedy products is already at increased risk of developing anosmia. Other common causes of olfactory dysfunction include age, nasal and sinus infections, head trauma, anatomical obstructions, and environmental irritants.” Id., at 77a-78a (internal quotation marks omitted).

The day after Matrixx issued this press release, its stock price bounced back to $13.40 per share.

On February 6, 2004, the end of the class period, Good Morning America, a nationally broadcast morning news program, highlighted Dr. Jafek’s findings. (The complaint does not allege that Matrixx learned of the news story before its broadcast.) The program reported that Dr. Jafek had discovered more than a dozen patients suffering from anosmia after using Zicam. It also noted that four lawsuits had been filed against Matrixx. The price of Matrixx stock plummeted to $9.94 per share that same day. Zicam again issued a press release largely repeating its February 2 statement.

On February 19, 2004, Matrixx filed a Form 8-K with the SEC stating that it had “ ‘convened a two-day meeting of physicians and scientists to review current information on smell disorders’ ” in response to Dr. Jafek’s presentation. Id., at 82a. According to the Form 8-K: “ ‘In the opinion of the panel, there is insufficient scientific evidence at this time to determine if zinc gluconate, when used as recommended, affects a person’s ability to smell.’ ” Ibid. A few weeks

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later, a reporter quoted Ma-trixx as stating that it would begin conducting “ ‘animal and human studies to further characterize these post-marketing complaints.’” Id., at 84a.

On the basis of these allegations, respondents claimed that Matrixx violated § 10(b) of the Securities Ex*408change Act and SEC Rule 10b-5 by making untrue statements of fact and failing to disclose material facts necessary to make the statements not misleading in an effort to maintain artificially high prices for Matrixx securities.

B

Matrixx moved to dismiss respondents’ complaint, arguing that they had failed to plead the elements of a material misstatement or omission and scienter. The District Court granted the motion to dismiss. Relying on In re Carter-Wallace, Inc. Securities Litigation, 220 F.3d 36 (CA2 2000), it held that respondents had not alleged a “statistically significant correlation between the use of Zicam and anosmia so as to make failure to public[ly] disclose complaints and the University of Colorado study a material omission.” App. to Pet. for Cert. 50a. The District Court similarly agreed that respondents had not stated with particularity facts giving rise to a strong inference of scienter. See 15 U.S.C. § 78u—4(b)(2)(A). It noted that the complaint failed to allege that Matrixx disbelieved its statements about Zicam’s safety or that any of the defendants profited or attempted to profit from Matrixx’s public statements. App. to Pet. for Cert. 52a.

The Court of Appeals reversed. 585 F.3d 1167 (CA9 2009). Noting that “ ‘[t]he determination [of materiality] requires delicate assessments of the inferences a “reasonable shareholder” would draw from a given set of facts and the significance of those inferences to him,’” id., at 1178 (quoting Basic Inc. v. Levinson, 485 U.S. 224, 236, 108 S. Ct. 978, 99 L. Ed. 2d 194 (1988); some internal quotation marks omitted; alterations in original), the Court of Appeals held that the District Court had erred in

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requiring an allegation of statistical significance to establish materiality. It concluded, to the contrary, that the complaint adequately alleged “information regarding the possible link between Zicam and anosmia” that would have been significant to a reasonable investor. 585 F.3d, at 1179, 1180. Turning to scienter, the Court of Appeals concluded that “[w]ithhold-ing reports of adverse effects of and lawsuits concerning the product responsible for the company’s remarkable sales increase is ‘an extreme departure from the standards of ordinary care,’ ” giving rise to a strong inference of scienter. Id., at 1183.

We granted certiorari, 560 U.S. 946, 130 S. Ct. 3411, 177 L. Ed. 2d 323 (2010), and we now affirm.

II

Section 10(b) of the Securities Exchange Act makes it unlawful for any person to “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.” 15 U.S.C. § 78j(b). SEC Rule 10b-5 implements this provision by making it unlawful to, among other things, “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.” 17 CFR § 240.10b-5(b). We have implied a private cause of action from the text and purpose of § 10(b). See Tellabs, Inc. v. Makor Is *409 sues & Rights, Ltd., 551 U.S. 308, 318, 127 S. Ct. 2499, 168 L. Ed. 2d 179 (2007).

To prevail on their claim that Matrixx made material misrepresentations or omissions in violation of § 10(b) and Rule 10b-5, respondents must prove “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss

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causation.” Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 157, 128 S. Ct. 761, 169 L. Ed. 2d 627 (2008). Matrixx contends that respondents have failed to plead both the element of a material misrepresentation or omission and the element of scienter because they have not alleged that the reports received by Matrixx reflected statistically significant evidence that Zicam caused an-osmia. We disagree.

A

We first consider Matrixx’s argument that “adverse event reports that do not reveal a statistically significant increased risk of adverse events from product use are not material information.” Brief for Petitioners 17 (capitalization omitted).

1

To prevail on a § 10(b) claim, a plaintiff must show that the defendant made a statement that was “misleading as to a material fact.”4 Basic, 485 U.S., at 238, 108 S. Ct. 978, 99 L. Ed. 2d 194. In Basic, we held that this materiality requirement is satisfied when there is “ ‘a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the “total mix” of information made available.’ ” Id., at 231-232, 108 S. Ct. 978, 99 L. Ed. 2d 194 (quoting TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S. Ct. 2126, 48 L. Ed. 2d 757 (1976)). We were “careful not to set too low a standard of materiality,” for fear that management would “ ‘bury the shareholders in an avalanche of trivial information.’ ” 485 U.S., at 231, 108 S. Ct. 978, 99 L. Ed. 2d 194 (quoting TSC Industries, 426 U.S., at 448-449, 96 S. Ct. 2126, 48 L. Ed. 2d 757).

Basic involved a claim that the defendant had made misleading statements denying that it was engaged in merger negotiations when it was, in fact, conducting preliminary negotiations.

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See 485 U.S., at 227-229, 108 S. Ct. 978, 99 L. Ed. 2d 194. The defendant urged a bright-line rule that preliminary merger negotiations are material only once the parties to the negotiations reach an agreement in principle. Id., at 232-233, 108 S. Ct. 978, 99 L. Ed. 2d 194. We observed that “[a]ny approach that designates a single fact or occurrence as always determinative of an inherently fact-specific finding such as materiality, must necessarily be overin-clusive or underinclusive.” Id., at 236, 108 S. Ct. 978, 99 L. Ed. 2d 194. We thus rejected the defendant’s proposed rule, explaining that it would “artificially exclud[e] from the definition of materiality information con*410cerning merger discussions, which would otherwise be considered significant to the trading decision of a reasonable investor.” Ibid.

Like the defendant in Basic, Ma-trixx urges us to adopt a bright-line rule that reports of adverse event5 associated with a pharmaceutical company’s products cannot be material absent a sufficient number of such reports to establish a statistically significant risk that the product is in fact causing the events.6 Absent statistical significance, Matrixx argues,

[563 U.S. 40]

adverse event reports provide only “anecdotal” evidence that “the user of a drug experienced an adverse event at some point during or following the use of that drug.” Brief for Petitioners 17. Accordingly, it contends, reasonable investors would not consider such reports relevant unless they are statistically significant because only then do they “reflect a scientifically reliable basis for inferring a potential causal link between product use and the adverse event.” Id., at 32.

As in Basic, Matrixx’s categorical rule would “artificially exclud[e]” information that “would otherwise be considered significant to the trading decision of a reasonable investor.” 485 U.S., at 236, 108 S. Ct. 978, 99 L. Ed. 2d 194. Matrixx’s argument rests on the premise that statistical significance is the only reliable indication of causation. This premise is flawed: As the SEC points out, “medical researchers . . . consider multiple factors in assessing causation.” Brief for United States as Amicus Curiae 12. Statistically significant data are not always available. For example, when an adverse event is subtle or rare, “an inability to obtain a data set of appropriate quality or quantity may preclude a finding of statistical significance.” Id., at 15; see also Brief for Medical Researchers as Amici Curiae 11. Moreover, ethical considerations may prohibit researchers from conducting randomized clinical trials to confirm a suspected causal link for the purpose of obtaining statistically significant data. See id., at 10-11.

A lack of statistically significant data does not mean that medical experts have no reliable basis for inferring a causal link between a drug and adverse events. As Matrixx itself concedes, medical experts rely on other evidence to establish an inference of causation. See Brief for Petitioners *41144-45, n. 22.7 We note that courts frequently permit expert testimony

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on causation based on evidence other than statistical significance. See, e.g., Best v. Lowe’s Home Centers, Inc., 563 F.3d 171, 178 (CA6 2009); Westberry v. Gislaved Gummi AB, 178 F.3d 257, 263-264 (CA4 1999) (citing cases); Wells v. Ortho Pharmaceutical Corp., 788 F.2d 741, 744-745 (CA11 1986). We need not consider whether the expert testimony was properly admitted in those cases, and we do not attempt to define here what constitutes reliable evidence of causation. It suffices to note that, as these courts have recognized, “medical professionals and researchers do not limit the data they consider to the results of randomized clinical trials or to statistically significant evidence.” Brief for Medical Researchers as Amici Curiae 31.

The FDA similarly does not limit the evidence it considers for purposes of assessing causation and taking regulatory action to statistically significant data. In assessing the safety risk posed by a product, the FDA considers factors such as “strength of the association,” “temporal relationship of product use and the event,” “consistency of findings across available data sources,” “evidence of a dose-response for the effect,” “biologic plausibility,” “seriousness of the event relative to the disease being treated,” “potential to mitigate the risk in the population,” “feasibility of further study using observational or controlled clinical study designs,” and “degree of benefit the product provides, including availability of other therapies.”8 FDA, Guidance for Industry: Good Pharmacovigilance Practices and Pharmacoepidemiologic Assessment 18 (2005) (capitalization omitted), http://

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www.fda.gov/ downloads / Regulatinglnformation/ Guidances/UCM126834.pdf (all Internet materials as visited Mar. 17, 2011, and available in Clerk of Court’s case file); see also Brief for United States as Amicus Curiae 19-20 (same); FDA, The Clinical Impact of Adverse Event Reporting 6 (1996) (similar), http:// www.fda.gov/downloads/safety/ MedWatch/UCM168505.pdf. It “does not apply any single metric for determining when additional inquiry or action is necessary, and it certainly does not insist upon ‘statistical significance.’ ” Brief for United States as Amicus Curiae 19.

Not only does the FDA rely on a wide range of evidence of causation, it sometimes acts on the basis of evidence that suggests, but does not prove, causation. For example, the FDA requires manufacturers of over-the-counter drugs to revise their labeling “to include a warning as soon as there is reasonable evidence of an association of a serious hazard with a drug; a causal relationship need not have been proved.” 21 CFR § 201.80(e). More generally, the FDA may make regulatory decisions against drugs based on postmarket-ing evidence that gives rise to only a *412suspicion of causation. See FDA, The Clinical Impact of Adverse Event Reporting, supra, at 7 (“[AJchieving certain proof of causality through post-marketing surveillance is unusual. Attaining a prominent degree of suspicion is much more likely, and may be considered a sufficient basis for regulatory decisions” (footnote omitted)).9

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This case proves the point. In 2009, the FDA issued a warning letter to Matrixx stating that “[a] significant and growing body of evidence substantiates that the Zicam Cold Remedy intranasal products may pose a serious risk to consumers who use them.” App. 270a. The letter cited as evidence 130 reports of anosmia the FDA had received, the fact that the FDA had received few reports of an-osmia associated with other intrana-sal cold remedies, and “evidence in the published scientific literature that various salts of zinc can damage olfactory function in animals and humans.” Ibid. It did not cite statistically significant data.

Given that medical professionals and regulators act on the basis of evidence of causation that is not statistically significant, it stands to reason that in certain cases reasonable investors would as well. As Matrixx acknowledges, adverse event reports “appear in many forms, including direct complaints by users to manufacturers, reports by doctors about reported or observed patient reactions, more detailed case reports published by doctors in medical journals, or larger scale published clinical studies.” Brief for Petitioners 17. As a result, assessing the materiality of adverse event reports is a “fact-specific” inquiry, Basic, 485 U.S., at 236, 108 S. Ct. 978, 99 L. Ed. 2d 194, that requires consideration of the source, content, and context of the reports. This is not to say that statistical significance (or the lack thereof) is irrelevant—only that it is not dis-positive of every case.

Application of Basic’s “total mix” standard does not mean that pharmaceutical manufacturers must disclose all reports of adverse events. Adverse event reports are daily events in the pharmaceutical industry; in 2009, the FDA entered nearly 500,000 such reports into its reporting system, see FDA, Reports Received and Reports Entered in AERS

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by Year (as of Mar. 31, 2010), http:// www. fda. gov/Drugs/Guidance Compli anee Regulatorylnformation/Surveil lance/AdverseDrugEffects/ucm070434. htm. The fact that a user of a drug has suffered an adverse event, standing alone, does not mean that the drug caused that event. See FDA, Annual Adverse Drug Experience Report: 1996, p. 2 (1997), http://druganddevicelaw.net/ Annual % 2 0 Adverse % 2 0 Drug2 0 Experi ence%20Report%201996.pdf. The question remains whether a reasonable investor would have viewed the nondisclosed *413information “ ‘as having significantly altered the “total mix” of information made available.’ ” Basic, 485 U.S., at 232, 108 S. Ct. 978, 99 L. Ed. 2d 194 (quoting TSC Industries, 426 U.S., at 449, 96 S. Ct. 2126, 48 L. Ed. 2d 757; emphasis added). For the reasons just stated, the mere existence of reports of adverse events—which says nothing in and of itself about whether the drug is causing the adverse events— will not satisfy this standard. Something more is needed, but that something more is not limited to statistical significance and can come from “the source, content, and context of the reports,” supra, at 43, 179 L. Ed. 2d, at 412. This contextual inquiry may reveal in some cases that reasonable investors would have viewed reports of adverse events as material even though the reports did not provide statistically significant evidence of a causal link.10

Moreover, it bears emphasis that § 10(b) and Rule 10b-5(b) do not create an affirmative duty to disclose any and all material information. Disclosure is required under these provisions only when necessary “to make . . . statements made, in the light of the circumstances under which they were made, not misleading.” 17 CFR § 240.10b-5(b); see also

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Basic, 485 U.S., at 239, n. 17, 108 S. Ct. 978, 99 L. Ed. 2d 194 (“Silence, absent a duty to disclose, is not misleading under Rule 10b-5”). Even with respect to information that a reasonable investor might consider material, companies can control what they have to disclose under these provisions by controlling what they say to the market.

2

Applying Basic’s “total mix” standard in this case, we conclude that respondents have adequately pleaded materiality. This is not a case about a handful of anecdotal reports, as Ma-trixx suggests. Assuming the complaint’s allegations to be true, as we must, Matrixx received information that plausibly indicated a reliable causal link between Zicam and anos-mia. That information included reports from three medical professionals and researchers about more than 10 patients who had lost their sense of smell after using Zicam. Clarot told Linschoten that Matrixx had received additional reports of anosmia. (In addition, during the class period, nine plaintiffs commenced four product liability lawsuits against Matrixx alleging a causal link between Zicam use and anosmia.)11 Further, Matrixx knew that Linschoten and Dr. Jafek had presented their findings about a causal link between Zicam and anosmia to a national medical conference devoted to treatment of diseases of the nose.12 Their presentation described a patient who *414experienced severe burning

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in his nose, followed immediately by a loss of smell, after using Zicam—suggest-ing a temporal relationship between Zicam use and anosmia.

Critically, both Dr. Hirsch and Lin-schoten had also drawn Matrixx’s attention to previous studies that had demonstrated a biological causal link between intranasal application of zinc and anosmia.13 Before his conversation with Linschoten, Clarot, Ma-trixx’s vice president of research and development, was seemingly unaware of these studies, and the complaint suggests that, as of the class period, Matrixx had not conducted any research of its own relating to anosmia. See, e.g., App. 84a (referencing a press report, issued after the end of the class period, noting that Matrixx said it would begin conducting “ ‘animal and human studies to further characterize these post-marketing complaints’ ”). Accordingly, it can reasonably be inferred from the complaint that Matrixx had no basis for rejecting Dr. Jafek’s findings out of hand.

We believe that these allegations suffice to “raise a reasonable expectation that discovery will reveal evidence” satisfying the materiality requirement, Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007), and to “allo[w] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged,” Iqbal, 556 U.S., at 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868. The information provided to Matrixx by medical experts revealed a plausible causal relationship between Zicam Cold

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Remedy and anosmia. Consumers likely would have viewed the risk associated with Zicam (possible loss of smell) as substantially outweighing the benefit of using the product (alleviating cold symptoms), particularly in light of the existence of many alternative products on the market. Importantly, Zicam Cold Remedy allegedly accounted for 70 percent of Matrixx’s sales. Viewing the allegations of the complaint as a whole, the complaint alleges facts suggesting a significant risk to the commercial viability of Matrixx’s leading product.

It is substantially likely that a reasonable investor would have viewed this information “ ‘as having significantly altered the “total mix” of information made available.’ ” Basic, 485 U.S., at 232, 108 S. Ct. 978, 99 L. Ed. 2d 194 (quoting TSC Industries, 426 U.S., at 449, 96 S. Ct. 2126, 48 L. Ed. 2d 757). Matrixx told the market that revenues were going to rise 50 and then 80 percent. Assuming the complaint’s allegations to be true, however, Matrixx had information indicating a significant risk to its leading revenue-generating product. Matrixx also stated that reports indicating *415that Zicam caused anosmia were “ ‘completely unfounded and misleading’ ” and that “ ‘the safety and efficacy of zinc gluconate for the treatment of symptoms related to the common cold have been well established.’ ” App. 77a-78a. Importantly, however, Matrixx had evidence of a biological link between Zicam’s key ingredient and anosmia, and it had not conducted any studies of its own to disprove that link. In fact, as Ma-trixx later revealed, the scientific evidence at that time was “ ‘insufficient . . . to determine if zinc gluconate, when used as recommended, affects a person’s ability to smell.’ ” Id., at 82a.

Assuming the facts to be true, these were material facts “necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.” 17 CFR § 240.10b-5(b). We therefore affirm the Court of Appeals’ holding that respondents adequately pleaded the element of a material misrepresentation or omission.

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B

Matrixx also argues that respondents failed to allege facts plausibly suggesting that it acted with the required level of scienter. “To establish liability under § 10(b) and Rule 10b-5, a private plaintiff must prove that the defendant acted with scien-ter, ‘a mental state embracing intent to deceive, manipulate, or defraud.’ ” Tellabs, 551 U.S., at 319, 127 S. Ct. 2499, 168 L. Ed. 2d 179 (quoting Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193-194, and n. 12, 96 S. Ct. 1375, 47 L. Ed. 2d 668 (1976)). We have not decided whether recklessness suffices to fulfill the scienter requirement. See Tellabs, 551 U.S., at 319, n. 3, 127 S. Ct. 2499, 168 L. Ed. 2d 179. Because Matrixx does not challenge the Court of Appeals’ holding that the scienter requirement may be satisfied by a showing of “deliberate recklessness,” see 585 F.3d, at 1180 (internal quotation marks omitted), we assume, without deciding, that the standard applied by the Court of Appeals is sufficient to establish scienter.14

Under the PSLRA, a plaintiff must “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(2)(A) (2006 ed., Supp. IV). This standard requires courts to take into account “plausible opposing inferences.” Tellabs, 551 U.S., at 323, 127 S. Ct. 2499, 168 L. Ed. 2d 179. A complaint adequately pleads scienter under the PSLRA “only if a reasonable person would deem the inference of scienter cogent and at least as compelling as any opposing inference one could draw from the facts alleged.” Id., at 324, 127 S. Ct. 2499, 168 L. Ed. 2d 179. In making this determination, the court must review “all the allegations holistically.” Id., at 326, 127 S. Ct. 2499, 168 L. Ed. 2d 179. The absence of a motive allegation, though relevant, is not dispositive. Id., at 325, 127 S. Ct. 2499, 168 L. Ed. 2d 179.

Matrixx argues, in summary fashion, that because respondents do not allege that it knew of statistically significant evidence of causation, there is no basis to consider the

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inference that it acted recklessly or knowingly to be at least as compelling as *416the alternative inferences. “Rather,” it argues, “the most obvious inference is that petitioners did not disclose the [reports] simply because petitioners believed they were far too few ... to indicate anything meaningful about adverse reactions to use of Zicam.” Brief for Petitioners 49. Matrixx’s proposed bright-line rule requiring an allegation of statistical significance to establish a strong inference of scien-ter is just as flawed as its approach to materiality.

The inference that Matrixx acted recklessly (or intentionally, for that matter) is at least as compelling as, if not more compelling than, the inference that it simply thought the reports did not indicate anything meaningful about adverse reactions. According to the complaint, Matrixx was sufficiently concerned about the information it received that it informed Linschoten that it had hired a consultant to review the product, asked Linschoten to participate in animal studies, and convened a panel of physicians and scientists in response to Dr. Jafek’s presentation. It successfully prevented Dr. Jafek from using Zicam’s name in his presentation on the ground that he needed Matrixx’s permission to do so. Most significantly, Matrixx issued a press release that suggested that studies had confirmed that Zicam does not cause anosmia when, in fact, it had not conducted any studies relating to anosmia and the scientific evidence at that time, according to the panel of scientists, was insufficient to determine whether Zicam did or did not cause anosmia.15

[563 U.S. 50]

These allegations, “taken collectively,” give rise to a “cogent and compelling” inference that Matrixx elected not to disclose the reports of adverse events not because it believed they were meaningless but because it understood their likely effect on the market. Tellabs, 551 U.S., at 323, 324, 127 S. Ct. 2499, 168 L. Ed. 2d 179. “[A] reasonable person” would deem the inference that Matrixx acted with deliberate recklessness (or even intent) “at least as compelling as any opposing inference one could draw from the facts alleged.” Id., at 324, 127 S. Ct. 2499, 168 L. Ed. 2d 179. We conclude, in agreement with the Court of Appeals, that respondents have adequately pleaded scienter. Whether respondents can ultimately prove their allegations and establish scienter is an altogether different question.

For the reasons stated, the judgment of the Court of Appeals for the Ninth Circuit is affirmed.

*815Justice Stevens

delivered the opinion of the Court.

The Securities and Exchange Commission (SEC) filed a civil complaint alleging that a stockbroker violated both § 10(b) of the Securities Exchange Act of 1934, 48 Stat. 891, as amended, 15 U. S. C. § 78j(b), and the SEC’s Rule 10b-5, by selling his customer’s securities and using the proceeds for his own benefit without the customer’s knowledge or consent. The question presented is whether the alleged fraudulent conduct was "in connection with the purchase or sale of any security” within the meaning of the statute and the Rule.

I

Between 1987 and 1991, respondent was employed as a securities broker in the Maryland branch of a New York brokerage firm. In 1987, he persuaded William Wood, an elderly man in poor health, to open a joint investment account for himself and his mentally retarded daughter. According to . the SEC’s complaint, the "stated investment objectives for the account were ‘safety of principal and income.’” App. to Pet. for Cert. 27a. The Woods granted respondent discretion to manage their account and a general power of attorney to engage in securities transactions for their benefit without prior approval. Relying on respondent’s promise to “conservatively invest” their money, the Woods entrusted him with $419,255. Before Mr. Wood’s death in 1991, all of that money was gone.

In 1991, the National Association of Securities Dealers (NASD) conducted a routine examination of respondent’s firm and discovered that on over 25 separate occasions, money had been transferred from the Woods’ account to accounts controlled by respondent. In due course, respondent was indicted in the United States District Court for the District of Maryland on 13 counts of wire fraud in violation, of 18 U. S. C. §1343. App. to Pet. for Cert. 40a. The first count alleged that respondent sold securities in the Woods’ account and then made personal use of the proceeds. Id., at *81642a. Each of the other counts alleged that he made wire transfers between Maryland and New York that enabled him to withdraw specified sums from the Woods’ accounts. Id., at 42a-50a. Some of those transfers involved respondent writing checks to himself from a mutual fund account held by the Woods, which required liquidating securities in order to redeem the checks. Respondent was convicted on all counts, sentenced to prison for 52 months, and ordered to pay $10,800 in restitution.

After respondent was indicted, the SEC filed a civil complaint in the same District Court alleging that respondent violated § 10(b) and Rule 10b-5 by engaging in a scheme to defraud the Woods and by misappropriating approximately $343,000 of the Woods’ securities without their knowledge or consent. Id., at 27a. The SEC moved for partial summary judgment after respondent’s criminal conviction, arguing that the judgment in the criminal case estopped respondent from contesting facts that established a violation of § 10(b).1 Respondent filed a motion seeking discovery on the question whether his fraud had the requisite “connection with” the purchase or sale of a security. The District Court refused to allow discovery and entered summary judgment against respondent. It enjoined him from engaging in future violations of the securities laws and ordered him to disgorge $343,000 in ill-gotten gains.

The Court of Appeals for the Fourth Circuit reversed the summary judgment and remanded with directions for the District Court to dismiss the complaint. 238 F. 3d 559 *817(2001). It first held that the wire fraud conviction, which only required two findings — (1) that respondent engaged in a scheme to defraud and (2) that he used interstate wire communications in executing the scheme — did not establish all the elements of a § 10(b) violation. Specifically, the conviction did not necessarily establish that his fraud was “in connection with” the sale of a security. Id., at 562.2 The court then held that the civil complaint did not sufficiently allege the necessary connection because the sales of the Woods’ securities were merely incidental to a fraud that “lay in absconding with the proceeds” of sales that were conducted in “a routine and customary fashion,” id., at 564. Respondent’s “scheme was simply to steal the Woods’ assets” rather than to engage “in manipulation of a particular secu*818rity.” Id., at 565. Ultimately, the court refused “to stretch the language of the securities fraud provisions to encompass every conversion or theft that happens to involve securities.” Id., at 566. Adopting what amounts to a “fraud on the market” theory of the statute’s coverage, the court held that without some “relationship to market integrity or investor understanding,” there is no violation of § 10(b). Id., at 563.

We granted the SEC’s petition for a writ of certiorari, 534 U. S. 1015 (2001), to review the Court of Appeals’ construction of the phrase “in connection with the purchase or sale of any security.” Because the Court of Appeals ordered the complaint dismissed rather than remanding for reconsideration, we assume the allegations contained therein are true and affirm that disposition only if no set of facts would entitle petitioner to relief. See Hartford Fire Ins. Co. v. California, 509 U. S. 764, 811 (1993). We do not reach the question whether the record supports the District Court’s grant of summary judgment in the SEC’s favor — a question that requires all potential factual disputes to be resolved in respondent’s favor.3 We merely hold that the allegations of the complaint, if true, entitle the SEC to relief; therefore, the Court of Appeals should not have directed that the complaint be dismissed.

*819II

Section 10(b) of the Securities Exchange Act makes it “unlawful for any person . . . [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 [SEC] may prescribe.” 15 U. S. C. §78j. Rule 10b-5, which implements this provision, forbids the use, “in connection with the purchase or sale of any security,” of “any device, scheme, or artifice to defraud” or any other “act, practice, or course of business” that “operates ... as a fraud or deceit.” 17 CFR §240.10b-5 (2000). Among .Congress’ objectives in passing the Act was “to insure honest securities markets and thereby promote investor confidence” after the market crash of 1929. United States v. O’Hagan, 521 U. S. 642, 658 (1997); see also United States v. Naftalin, 441 U. S. 768, 775 (1979). More generally, Congress sought “ ‘to substitute a philosophy of full disclosure for the philosophy of caveat emptor and thus to achieve a high standard of business ethics in the securities industry.’ ” Affiliated Ute Citizens of Utah v. United States, 406 U. S. 128, 151 (1972) (quoting SEC v. Capital Gains Research Bureau, Inc., 375 U. S. 180, 186 (1963)).

Consequently, we have explained that the statute should be “construed ‘not technically and restrictively, but flexibly to effectuate its remedial purposes.’” 406 U. S., at 151 (quoting Capital Gains Research Bureau, Inc., 375 U. S., at 195). In its role enforcing the Act, the SEC has consistently adopted a broad reading of the phrase “in connection with the purchase or sale of any security.” It has maintained that a broker who accepts payment for securities that he never intends to deliver, or who sells customer securities with intent to misappropriate the proceeds, violates § 10(b) and Rule 10b-5. See, e.g., In re Bauer, 26 S. E. C. 770 (1947); In re Southeastern Securities Corp., 29 S. E. C. 609 (1949). This interpretation of the ambiguous text of § 10(b), in the context of formal adjudication, is entitled to deference *820if it is reasonable, see United States v. Mead Corp., 583 U. S. 218, 229-230, and n. 12 (2001). For the reasons set forth below, we think it is. While the statute must not be construed so broadly as to convert every common-law fraud that happens to involve securities into a violation of § 10(b), Marine Bank v. Weaver, 455 U. S. 551, 556 (1982) (“Congress, in enacting the securities laws, did not intend to provide a .broad federal remedy for all fraud”), neither the SEC nor this Court has ever held that there must be a misrepresentation about the value of a particular security in order to run afoul of the Act.

The SEC claims respondent engaged in a fraudulent scheme in which he made sales of his customer’s securities for his own benefit. Respondent submits that the sales themselves were perfectly lawful and that the subsequent misappropriation of the proceeds, though fraudulent, is not properly viewed as having the requisite connection with the sales; in his view, the alleged scheme is not materially different from a simple theft of cash or securities in an investment account. We disagree.

According to the complaint, respondent “engaged in a scheme to defraud” the Woods beginning in 1988, shortly after they opened their account, and that scheme continued throughout the 2-year period during which respondent made a series of transactions that enabled him to convert the proceeds of the sales of the Woods’ securities to his own use. App. to Pet. for Cert. 27a-29a. The securities sales and respondent’s fraudulent practices were not independent events. This is not a case in which, after a lawful transaction had been consummated, a broker decided to steal the proceeds and did so. Nor is it a case in which a thief simply invested the proceeds of a routine conversion in the stock market. Rather, respondent’s fraud coincided with the sales themselves.

Taking the allegations in the complaint as true, each sale was made to further respondent’s fraudulent scheme; each *821was deceptive because it was neither authorized by, nor disclosed to, the Woods. With regard to the sales of shares in the Woods’ mutual fund, respondent initiated these transactions by writing a check to himself from that account, knowing that redeeming the check would require the sale of securities. Indeed, each time respondent “exercised his power of disposition for his own benefit,” that conduct, “without more,” was a fraud. United States v. Dunn, 268 U. S. 121, 131 (1925). In the aggregate, the sales are properly viewed as a “course of business” that operated as a fraud or deceit on a stockbroker’s customer.

Insofar as the connection between respondent’s deceptive practices and his sale of the Woods’ securities is concerned, the case is remarkably similar to Superintendent of Ins. of N. Y. v. Bankers Life & Casualty Co., 404 U. S. 6 (1971). In that case the directors of Manhattan Casualty Company authorized the sale of the company’s portfolio of treasury bonds because they had been “duped” into believing that the company would receive the proceeds of the sale. Id., at 9. We held that “Manhattan was injured as an investor through a deceptive device which deprived it of any compensation for the sale of its valuable block of securities.” Id., at 10. In reaching this conclusion, we did not ask, as the Fourth Circuit did in this case, whether the directors were misled about the value of a security or whether the fraud involved “manipulation of a particular security.” 238 F. 3d, at 565. In fact, we rejected the Second Circuit’s position in Superintendent of Ins. of N. Y. v. Bankers Life & Casualty Co., 430 F. 2d 355, 361 (1970), that because the fraud against Manhattan did not take place within the context of a securities exchange it was not prohibited by § 10(b). 404 U. S., at 10. We refused to read the statute so narrowly, noting that it “must be read flexibly, not technically and restrictively.” Id., at 12. Although we recognized that the interest in “ ‘preserving the integrity of the securities markets’ ” was one of the purposes animating the statute, we rejected the notion that § 10(b) is *822limited to serving that objective alone. Ibid. (“We agree that Congress by § 10(b) did not seek to regulate transactions which constitute no more than internal corporate mismanagement. But we read § 10(b) to mean that Congress meant to bar deceptive devices and contrivances in the purchase or sale of securities whether conducted in the organized markets or face to face”).

Like the company directors in Bankers Life, the Woods were injured as investors through respondent’s deceptions, which deprived them of any compensation for the sale of their valuable securities. They were duped into believing respondent would “conservatively invest” their assets in the stock market and that any transactions made on their behalf would be for their benefit for the “ ‘safety of principal and income.’” App. to Pet. for Cert. 27a. The fact that respondent misappropriated the proceeds of the sales provides persuasive evidence that he had violated § 10(b) when he made the sales, but misappropriation is not an essential element of the offense. Indeed, in Bankers Life, we flatly stated that it was “irrelevant” that “the proceeds of the sale that were due the seller were misappropriated.” 404 U. S., at 10. It is enough that the scheme to defraud and the sale of securities coincide.

The Court of Appeals below distinguished Bankers Life on the ground that it involved an affirmative misrepresentation, whereas respondent simply failed to inform the Woods of his intent to misappropriate their securities. 238 F. 3d, at 566. We are not persuaded by this distinction. Respondent was only able to carry out his fraudulent scheme without making an affirmative misrepresentation because the Woods had trusted him to make transactions in their best interest without prior approval. Under these circumstances, respondent’s fraud represents an even greater threat to investor confidence in the securities industry than the misrepresentation in Bankers Life. Not only does such a fraud prevent investors from trusting that their brokers are executing *823transactions for their benefit, but it undermines the value of a discretionary account like that held by the Woods. The benefit of a discretionary account is that it enables individuals, like the Woods, who lack the time, capacity, or know-how to supervise investment decisions, to delegate authority to a broker who will make decisions in their best interests without prior approval. If such individuals cannot rely on a broker to exercise that discretion for their benefit, then the account loses its added value. Moreover, any distinction between omissions and misrepresentations is illusory in the context of a broker who has a fiduciary duty to her clients. See Chiarella v. United States, 445 U. S. 222,230 (1980) (noting that “silence in connection with the purchase or sale of securities may operate as a fraud actionable under § 10(b)” when there is “a duty to disclose arising from a relationship of trust and confidence between parties to a transaction”); Affiliated Ute Citizens of Utah v. United States, 406 U. S., at 153.

More recently, in Wharf (Holdings) Ltd. v. United Int’l Holdings, Inc., 532 U. S. 588 (2001), our decision that the seller of a security had violated § 10(b) focused on the secret intent of the seller when the sale occurred. The purchaser claimed “that Wharf sold it a security (the option) while secretly intending from the very beginning not to honor the option.” Id., at 597. Although Wharf did not specifically argue that the breach of contract underlying the complaint lacked the requisite connection with a sale of securities, it did assert that the case was merely a dispute over ownership of the option, and that interpreting § 10(b) to include such a claim would convert every breach of contract that happened to involve a security into a violation of the federal securities laws. Id., at 596. We rejected that argument because the purchaser’s claim was not that the defendant failed to carry out a promise to sell securities; rather, the claim was that the defendant sold a security while never intending to honor its agreement in the first place. Id., at 596-597. Similarly, *824in this case the SEC claims respondent sold the Woods’ securities while secretly intending from the very beginning to keep the proceeds. In Wharf, the fraudulent intent deprived the purchaser of the benefit of the sale whereas here the fraudulent intent deprived the seller of that benefit, but the connection between the deception and the sale in each case is identical.

In United States v. O’Hagan, 521 U. S. 642 (1997), we held that the defendant had committed fraud “in connection with” a securities transaction when he used misappropriated confidential information for trading purposes. We reasoned that “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.” Id., at 656. The Court of Appeals distinguished O’Hagan by reading it to require that the misappropriated information or assets not have independent value to the client outside the securities market, 238 F. 3d, at 565. We do not read O’Hagan as so limited. In the chief passage cited by the Court of Appeals for this proposition, we discussed the Government’s position that “[t]he misappropriation theory would not.,. apply to a ease 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,” because in that situation “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.” 521 U. S., at 656 (internal quotation marks omitted). Even if this passage could be read to introduce a new requirement into § 10(b), it would not affect our analysis of this case, because the Woods’ securities did not have value for respondent apart from their use in a secu*825rities transaction and the fraud was not complete before the sale of securities occurred.

As in Bankers Life, Wharf, and O’Hagan, the SEC complaint describes a fraudulent scheme in which the securities transactions and breaches of fiduciary duty coincide. Those breaches were therefore “in connection with” securities sales within the meaning of § 10(b).4 Accordingly, the judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

Justice BREYER delivered the opinion of the Court.

*380The Securities Litigation Uniform Standards Act of 1998 (which we shall refer to as the "Litigation Act") forbids the bringing of large securities class actions based upon violations of state law. It says that plaintiffs may not maintain a class action "based upon the statutory or common law of any State" in which the plaintiffs allege "a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security ." 15 U.S.C. § 78bb(f)(1) (emphasis added). The Act defines "class actions" as those involving more than 50 members. See § 78bb(f)(5). It defines "covered security" narrowly to include only securities *381traded on a national exchange (or, here irrelevant, those issued by investment companies). §§ 78bb(f)(5)(E), 77r(b)(1)-(2).

The question before us is whether the Litigation Act encompasses a class action in which the plaintiffs allege (1) that they "purchase[d]" uncovered securities (certificates of deposit that are not traded on any national exchange), but (2) that the defendants falsely told the victims that the uncovered securities were backed by covered securities. We note that the plaintiffs do not allege that the defendants' misrepresentations led anyone to buy or to sell (or to maintain positions in) covered securities. Under these circumstances, we conclude the Act does not apply.

In light of the dissent's characterization of our holding, post, at 1077 - 1078 (opinion of KENNEDY, j.)-which we believe is incorrect-we specify at the outset that this holding does not limit the Federal Government's authority to prosecute "frauds like the one here." Post, at 1077 - 1078. The Federal Government has in fact brought successful prosecutions against the fraudsters at the heart of this litigation, see infra, at 1074 - 1075, and we fail to understand the dissent's repeated suggestions to the contrary, post, at 1073, 1073 - 1074, 1077 - 1078, 1078, 1081. Rather, as we shall explain, we believe the basic consequence of our holding is that, *1063without limiting the Federal Government's prosecution power in any significant way, it will permit victims of this (and similar) frauds to recover damages under state law. See infra, at 1079 - 1081. Under the dissent's approach, they would have no such ability.

I

A

The relevant statutory framework has four parts:

(1) Section 10(b) of the underlying regulatory statute, the Securities Exchange Act of 1934. 48 Stat. 891, as amended, 15 U.S.C. § 78j (2012 ed.). This well-known statutory provision forbids the "use" or "employ[ment]" of "any manipulative or deceptive device or contrivance" "in *382connection with the purchase or sale of any security." § 78j(b).

Securities and Exchange Commission Rule 10b-5 similarly forbids the use of any "device, scheme, or artifice to defraud" (including the making of "any untrue statement of a material fact" or any similar "omi[ssion]") "in connection with the purchase or sale of any security." 17 C.F.R. § 240.10b-5 (2013).

For purposes of these provisions, the Securities Exchange Act defines "security" broadly to include not just things traded on national exchanges, but also "any note, stock, treasury stock, security future, security-based swap, bond, debenture ... [or] certificate of deposit for a security." 15 U.S.C. § 78c(a)(10). See also §§ 77b(a)(1), 80a-2(a)(36), 80b-2(a)(18) (providing virtually identical definitions of "security" for the Securities Act of 1933, the Investment Company Act of 1940, and the Investment Advisers Act of 1940).

(2) A statute-based private right of action. The Court has read § 10(b) and Rule 10b-5 as providing injured persons with a private right of action to sue for damages suffered through those provisions' violation. See, e.g., Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 730, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975).

The scope of the private right of action is more limited than the scope of the statutes upon which it is based. See Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 153, 155, 166, 128 S.Ct. 761, 169 L.Ed.2d 627 (2008) (private right does not cover suits against "secondary actors" who had no "role in preparing or disseminating" a stock issuer's fraudulent "financial statements"); Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N. A., 511 U.S. 164, 179, 114 S.Ct. 1439, 128 L.Ed.2d 119 (1994) (private right does not extend to actions against "aiders and abettors" of securities fraud); Blue Chip Stamps, supra, at 737, 95 S.Ct. 1917 (private right extends only to purchasers and sellers, not to holders, of securities).

(3) The Private Securities Litigation Reform Act of 1995 (PSLRA). 109 Stat. 737, 15 U.S.C. §§ 77z-1, 78u-4.

*383This law imposes procedural and substantive limitations upon the scope of the private right of action available under § 10(b) and Rule 10b-5. It requires plaintiffs to meet heightened pleading standards. It permits defendants to obtain automatic stays of discovery. It limits recoverable damages and attorney's fees. And it creates a new "safe harbor" for forward-looking statements. See §§ 78u-4, 78u-5.

(4) The Securities Litigation Uniform Standards Act. 112 Stat. 3227, 15 U.S.C. § 78bb(f)(1)(A). As we said at the outset, this 1998 law forbids any

"covered class action based upon the statutory or common law of any State ... by any private party alleging-*1064"(A) a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security; or

"(B) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security." §§ 78bb(f)(1)(A)-(B).

The law defines "covered security" narrowly. It is a security that "satisfies the standards for a covered security specified in paragraph (1) or (2) of section 18(b) of the Securities Act of 1933." § 78bb(f)(5)(E). And the relevant paragraphs of § 18(b) of the 1933 Act define a "covered security" as "[a security] listed, or authorized for listing, on a national securities exchange," § 77r(b)(1) (or, though not relevant here, as a security issued by an "investment company," § 77r(b)(2) ). The Litigation Act also specifies that a "covered security" must be listed or authorized for listing on a national exchange "at the time during which it is alleged that the misrepresentation, omission, or manipulative or deceptive conduct occurred." § 78bb(f)(5)(E).

The Litigation Act sets forth exceptions. It does not apply to class actions with fewer than 51 "persons or prospective class members." § 78bb(f)(5)(B). It does not *384apply to actions brought on behalf of a State itself. § 78bb(f)(3)(B)(i). It does not apply to class actions based on the law "of the State in which the issuer is incorporated." § 78bb(f)(3)(A)(i). And it reserves the authority of state securities commissions "to investigate and bring enforcement actions." § 78bb(f)(4).

We are here primarily interested in the Litigation Act's phrase "misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security." § 78bb(f)(1)(A). Unless this phrase applies to the class actions before us, the plaintiffs may maintain their state-law-based class actions, and they may do so either in federal or state court. Otherwise, their class actions are precluded altogether. See § 78bb(f)(2) (providing for the removal from state to federal court of class actions that meet the specifications of paragraph 1, and for the dismissal of such suits by the district court).

B

1

The plaintiffs in these actions (respondents here) say that Allen Stanford and several of his companies ran a multibillion dollar Ponzi scheme. Essentially, Stanford and his companies sold the plaintiffs certificates of deposit in Stanford International Bank. Those certificates "were debt assets that promised a fixed rate of return." Roland v. Green, 675 F.3d 503, 522 (C.A.5 2012). The plaintiffs expected that Stanford International Bank would use the money it received to buy highly lucrative assets. But instead, Stanford and his associates used the money provided by new investors to repay old investors, to finance an elaborate lifestyle, and to finance speculative real estate ventures.

The Department of Justice brought related criminal charges against Allen Stanford. A jury convicted Stanford of mail fraud, wire fraud, conspiracy to commit money laundering, and obstruction of a Securities and Exchange Commission investigation. Stanford was sentenced to prison and required to forfeit $6 billion.

*385The SEC, noting that the Bank certificates of deposit fell within the 1934 Securities Exchange Act's broad definition of " security," filed a § 10(b) civil case against Allen Stanford, the Stanford International Bank, and related Stanford companies and associates. The SEC won the civil action, and *1065the court imposed a civil penalty of $6 billion.

2

The plaintiffs in each of the four civil class actions are private investors who bought the Bank's certificates of deposit. Two groups of plaintiffs filed their actions in Louisiana state court against firms and individuals who helped sell the Bank's certificates by working as "investment advisers" affiliated with Stanford, or who provided Stanford-related companies with trust, insurance, accounting, or reporting services. (The defendants included a respondent here, SEI Investments Company.) The plaintiffs claimed that the defendants helped the Bank perpetrate the fraud, thereby violating Louisiana state law.

Two other groups of plaintiffs filed their actions in federal court for the Northern District of Texas. One group sued Willis of Colorado (and related Willis companies) and Bowen, Miclette & Britt, two insurance brokers; the other group sued Proskauer Rose and Chadbourne & Parke, two law firms. Both groups claimed that the defendants helped the Bank (and Allen Stanford) perpetrate the fraud or conceal it from regulators, thereby violating Texas securities law.

The Louisiana state-court defendants removed their cases to federal court, and the Judicial Panel on Multi-District Litigation moved the Louisiana cases to the Northern District of Texas. A single federal judge heard all four class actions.

The defendants in each of the cases moved to dismiss the complaints. The District Court concluded that the Litigation Act required dismissal. The court recognized that the certificates of deposit themselves were not "covered securities" under the Litigation Act, for they were not " 'traded nationally [or] listed on a regulated national exchange.' "

*386App. to Pet. for Cert. in No. 12-86, p. 62. But each complaint in one way or another alleged that the fraud included misrepresentations that the Bank maintained significant holdings in " 'highly marketable securities issued by stable governments [and] strong multinational companies,' " and that the Bank's ownership of these "covered" securities made investments in the uncovered certificates more secure. Id., at 66. The court concluded that this circumstance provided the requisite statutory "connection" between (1) the plaintiffs' state-law fraud claims, and (2) "transactions in covered securities." Id., at 64, 66-67. Hence, the court dismissed the class actions under the Litigation Act. Id., at 75. See also 675 F.3d, at 511.

All four sets of plaintiffs appealed. The Fifth Circuit reversed. It agreed with the District Court that the complaints described misrepresentations about the Bank's investments in nationally traded securities. Still, the "heart, crux, and gravamen of" the "allegedly fraudulent scheme was representing ... that the [uncovered] CDs were a 'safe and secure' investment that was preferable to other investments for many reasons." Id. , at 522. The court held that the falsehoods about the Bank's holdings in covered securities were too " 'tangentially related' " to the "crux" of the fraud to trigger the Litigation Act. Id. , at 520, 522 (quoting Madden v. Cowen & Co., 576 F.3d 957, 965-966 (C.A.9 2009) ). "That the CDs were marketed with some vague references to [the Bank's] portfolio containing instruments that might be [covered by the Litigation Act] seems tangential to the schemes," to the point where the complaints fall outside the scope of that Act. 675 F.3d, at 522.

Defendants in the four class actions sought certiorari. We granted their petitions.

*1066II

The question before us concerns the scope of the Litigation Act's phrase "misrepresentation or omission of a material fact in connection with the purchase or sale of a covered *387security." § 78bb(f)(1)(A). How broad is that scope? Does it extend further than misrepresentations that are material to the purchase or sale of a covered security?

In our view, the scope of this language does not extend further. To put the matter more specifically: A fraudulent misrepresentation or omission is not made "in connection with" such a "purchase or sale of a covered security" unless it is material to a decision by one or more individuals (other than the fraudster) to buy or to sell a "covered security." We add that in Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71, 126 S.Ct. 1503, 164 L.Ed.2d 179 (2006), we held that the Litigation Act precluded a suit where the plaintiffs alleged a "fraudulent manipulation of stock prices" that was material to and " 'coincide[d]' with" third-party securities transactions, while also inducing the plaintiffs to "hold their stocks long beyond the point when, had the truth been known, they would have sold." Id., at 75, 85, 89, 126 S.Ct. 1503 (citing United States v. O'Hagan, 521 U.S. 642, 651, 117 S.Ct. 2199, 138 L.Ed.2d 724 (1997) ). We do not here modify Dabit .

A

We reach this interpretation of the Litigation Act for several reasons. First, the Act focuses upon transactions in covered securities, not upon transactions in uncovered securities. An interpretation that insists upon a material connection with a transaction in a covered security is consistent with the Act's basic focus.

Second, a natural reading of the Act's language supports our interpretation. The language requires the dismissal of a state-law-based class action where a private party alleges a "misrepresentation or omission of a material fact" (or engages in other forms of deception, not relevant here) "in connection with the purchase or sale of a covered security." § 78bb(f)(1). The phrase "material fact in connection with the purchase or sale" suggests a connection that matters. And for present purposes, a connection matters where the misrepresentation makes a significant difference to someone's decision to purchase or to sell a covered security, not *388to purchase or to sell an uncovered security, something about which the Act expresses no concern. See generally Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. ----, ----, 131 S.Ct. 1309, 1317-1319, 179 L.Ed.2d 398 (2011) (a misrepresentation or omission is "material" if a reasonable investor would have considered the information significant when contemplating a statutorily relevant investment decision). Further, the "someone" making that decision to purchase or sell must be a party other than the fraudster. If the only party who decides to buy or sell a covered security as a result of a lie is the liar, that is not a " connection" that matters.

Third, prior case law supports our interpretation. As far as we are aware, every securities case in which this Court has found a fraud to be "in connection with" a purchase or sale of a security has involved victims who took, who tried to take, who divested themselves of, who tried to divest themselves of, or who maintained an ownership interest in financial instruments that fall within the relevant statutory definition. See, e.g., Dabit, supra, at 77, 126 S.Ct. 1503 (Litigation Act: victims were "holders" of covered securities that the defendant's fraud caused to become overvalued); SEC v. Zandford, 535 U.S. 813, 822, 122 S.Ct. 1899, 153 L.Ed.2d 1 (2002)

*1067(§ 10(b): victims were "duped into believing" that the defendant would " 'invest' their assets in the stock market"); Wharf (Holdings) Ltd. v. United Int'l Holdings, Inc., 532 U.S. 588, 592, 121 S.Ct. 1776, 149 L.Ed.2d 845 (2001) (§ 10(b): victim purchased an oral option to buy 10% of a company's stock); O'Hagan,supra, at 655-656, 117 S.Ct. 2199 (§ 10(b): victims were "members of the investing public" harmed by the defendant's "gain[ing of an] advantageous market position" through insider trading); Superintendent of Ins. of N.Y. v. Bankers Life & Casualty Co., 404 U.S. 6, 10, 92 S.Ct. 165, 30 L.Ed.2d 128 (1971) (§ 10(b): victim was "injured as an investor" when the fraud deprived it of "compensation for the sale of its valuable block of securities"). We have found no Court case involving a fraud "in connection with" the purchase or sale of a statutorily defined security in which the victims did not fit one of these descriptions. And the dissent apparently has not either.

*389Although the dissent characterizes our approach as "new," post, at 1073, and tries to describe several of our prior cases, such as Zandford or Dabit, in a different way, post, at 1079 - 1080, it cannot escape the fact that every case it cites involved a victim who took, tried to take, or maintained an ownership position in the statutorily relevant securities through "purchases" or "sales" induced by the fraud. E.g., Zandford, supra, at 815, 820, 122 S.Ct. 1899 (fraudster told customers he would " 'conservatively invest' their money" in the stock market and made sales of "his customer's securities," but pocketed the proceeds (emphasis added)); Dabit, supra, at 76, 85, 89, 126 S.Ct. 1503 (the " misrepresentations and manipulative tactics caused [the plaintiffs] to hold onto overvalued securities" while also inducing third parties to trade them); In re Orlando Joseph Jett, 82 S.E.C. Docket 1211, 1236-1237 (2004) (trader's scheme "greatly inflated the reporting trading profits" that his firm "used to determine ... the amount of capital he was permitted to commit on the firm's behalf " (emphasis added)).

Fourth, we read the Litigation Act in light of and consistent with the underlying regulatory statutes, the Securities Exchange Act of 1934 and the Securities Act of 1933. The regulatory statutes refer to persons engaged in securities transactions that lead to the taking or dissolving of ownership positions. And they make it illegal to deceive a person when he or she is doing so. Section 5 of the 1933 Act, for example, makes it unlawful to "offer to sell or offer to buy ... any security, unless a registration statement has been filed as to such security." 15 U.S.C. § 77e(c). Section 17 of the 1933 Act makes it unlawful "in the offer or sale of any securities ... to employ any device, scheme, or artifice to defraud, or to obtain money or property by means of any untrue statement of a material fact." §§ 77q(a)(1)-(2). And § 10(b) of the 1934 Act makes it unlawful to "use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance." § 78j(b).

*390Not only language but also purpose suggests a statutory focus upon transactions involving the statutorily relevant securities. The basic purpose of the 1934 and 1933 regulatory statutes is "to insure honest securities markets and thereby promote investor confidence." See O'Hagan, supra, at 658, 117 S.Ct. 2199. Nothing in the regulatory statutes suggests their object is to protect persons whose connection with the statutorily defined securities is more remote than words such as "buy," "sell," and the like, indicate. Nor does anything in the Litigation Act provide us *1068with reasons for interpreting its similar language more broadly.

The dissent correctly points out that the federal securities laws have another purpose, beyond protecting investors. Namely, they also seek to protect securities issuers, as well as the investment advisers, accountants, and brokers who help them sell financial products, from abusive class-action lawsuits. Post, at 1074 - 1075. Both the PSLRA and the Litigation Act were enacted in service of that goal. By imposing heightened pleading standards, limiting damages, and pre-empting state-law suits where the claims pertained to covered securities, Congress sought to reduce frivolous suits and mitigate legal costs for firms and investment professionals that participate in the market for nationally traded securities.

We fail to see, however, how our decision today undermines that objective. The dissent worries our approach will "subject many persons and entities whose profession it is to give advice, counsel, and assistance in investing in the securities markets to complex and costly state-law litigation." Post, at 1074. To the contrary, the only issuers, investment advisers, or accountants that today's decision will continue to subject to state-law liability are those who do not sell or participate in selling securities traded on U.S. national exchanges. We concede that this means a bank, chartered in Antigua and whose sole product is a fixed-rate debt instrument not traded on a U.S. exchange, will not be able to claim *391the benefit of preclusion under the Litigation Act. But it is difficult to see why the federal securities laws would be-or should be-concerned with shielding such entities from lawsuits.

Fifth, to interpret the necessary statutory "connection" more broadly than we do here would interfere with state efforts to provide remedies for victims of ordinary state-law frauds. A broader interpretation would allow the Litigation Act to cover, and thereby to prohibit, a lawsuit brought by creditors of a small business that falsely represented it was creditworthy, in part because it owns or intends to own exchange-traded stock. It could prohibit a lawsuit brought by homeowners against a mortgage broker for lying about the interest rates on their mortgages-if, say, the broker (not the homeowners) later sold the mortgages to a bank which then securitized them in a pool and sold off pieces as "covered securities." Brief for Sixteen Law Professors as Amici Curiae 24.

The dissent all but admits this. Its proposed rule is that whenever "the purchase or sale of the securities [including by the fraudster] is what enables the fraud," the Litigation Act pre-empts the suit. Post, at 1078. In other words, any time one person convinces another to loan him money, by pretending he owns nationally traded securities or will acquire them for himself in the future, the action constitutes federal securities fraud, is subject to federal enforcement, and is also precluded by the Litigation Act if it qualifies as a "covered class action" under § 78bb(f)(5)(B) (e.g., involves more than 50 members). Leaving aside whether this would work a significant expansion of the scope of liability under the federal securities laws, it unquestionably would limit the scope of protection under state laws that seek to provide remedies to victims of garden-variety fraud.

The text of the Litigation Act reflects congressional care to avoid such results. Under numerous provisions, it purposefully maintains state legal authority, especially *392over matters that are primarily of state concern. See §§ 78bb(f)(1)(A)-(B) (limiting preclusion to lawsuits involving "covered," i.e., nationally traded, securities); § 78bb(f) (4) (providing that the "securities *1069commission ... of any State shall retain jurisdiction under the laws of such State to investigate and bring enforcement actions"); § 78bb(f)(3)(B) (preserving States' authority to bring suits of the kind forbidden to private class-action plaintiffs). See also 112 Stat. 3227 ("Congress finds that ... it is appropriate to enact national standards for securities class action lawsuits involving nationally traded securities, while preserving the appropriate enforcement powers of State securities regulators"). A broad interpretation of the Litigation Act works at cross-purposes with this state-oriented concern. Cf. Zandford, 535 U.S., at 820, 122 S.Ct. 1899 (warning against "constru[ing]" the phrase "in connection with" "so broadly as to convert any common-law fraud that happens to involve securities into a violation of § 10(b)"); Wharf (Holdings) Ltd., 532 U.S., at 596, 121 S.Ct. 1776 (recognizing that "ordinary state breach-of-contract claims" are "actions that lie outside the [Securities Exchange] Act's basic objectives").

B

Respondents and the Government make two important counterarguments. Respondents point to statements we have made suggesting we should give the phrase "in connection with" a broad interpretation. In Dabit, for example, we said that the Court has consistently "espoused a broad interpretation" of "in connection with" in the context of § 10(b) and Rule 10b-5, and we added that the Litigation Act language similarly warranted a "broad construction." 547 U.S., at 85-86, 126 S.Ct. 1503. In Bankers Life, we said that, if a deceptive practice "touch[es]" a securities transaction, it meets § 10(b)'s "in connection with" requirement, 404 U.S., at 12, 92 S.Ct. 165, and in O'Hagan, we said the fraud and the purchase or sale of a security must simply "coincide." 521 U.S., at 656, 117 S.Ct. 2199. The idea, we explained in Zandford, is that the phrase "should be 'construed *393not technically and restrictively, but flexibly to effectuate its remedial purposes.' " 535 U.S., at 819, 122 S.Ct. 1899 (quoting Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 151, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972) ).

Every one of these cases, however, concerned a false statement (or the like) that was "material" to another individual's decision to "purchase or s[ell]" a statutorily defined "security" or "covered security." Dabit,supra, at 75-77, 126 S.Ct. 1503; Zandford, supra, at 822, 122 S.Ct. 1899; Wharf (Holdings) Ltd.,supra, at 590-592, 121 S.Ct. 1776; O'Hagan, supra, at 655-657, 117 S.Ct. 2199; Bankers Life, supra, at 10, 92 S.Ct. 165. And the relevant statements or omissions were material to a transaction in the relevant securities by or on behalf of someone other than the fraudster.

Second, the Government points out that § 10(b) of the Securities Exchange Act also uses the phrase "in connection with the purchase or sale of any security." 15 U.S.C. § 78j(b). And the Government warns that a narrow interpretation of "in connection with" here threatens a similarly narrow interpretation there, which could limit the SEC's enforcement capabilities. See Brief for United States as Amicus Curiae 28.

We do not understand, however, how our interpretation could significantly curtail the SEC's enforcement powers. As far as the Government has explained the matter, our interpretation seems perfectly consistent with past SEC practice. For one thing, we have cast no doubt on the SEC's ability to bring enforcement actions against Stanford and Stanford International Bank. The SEC has already done so successfully. As we have repeatedly pointed *1070out, the term "security" under § 10(b) covers a wide range of financial products beyond those traded on national exchanges, apparently including the Bank's certificates of deposit at issue in these cases. No one here denies that, for § 10(b) purposes, the "material" misrepresentations by Stanford and his associates were made "in connection with" the "purchases" of those certificates. *394We find it surprising that the dissent worries that our decision will "narro [w] and constric[t] essential protection for our national securities market,"post, at 1073, and put "frauds like the one here ... not within the reach of federal regulation," post, at 1077 - 1078. That would be news to Allen Stanford, who was sentenced to 110 years in federal prison after a successful federal prosecution, and to Stanford International Bank, which was ordered to pay billions in federal fines, after the same. Frauds like the one here-including this fraud itself -will continue to be within the reach of federal regulation because the authority of the SEC and Department of Justice extends to all "securities," not just to those traded on national exchanges. 15 U.S.C. § 78c(a)(10) ; accord, § 77b(a)(1), § 80a-2(a)(36), § 80b-2(a)(18). When the fraudster peddles an uncovered security like the CDs here, the Federal Government will have the full scope of its usual powers to act. The only difference between our approach and that of the dissent, is that we also preserve the ability for investors to obtain relief under state laws when the fraud bears so remote a connection to the national securities market that no person actually believed he was taking an ownership position in that market.

Thus, despite the Government's and the dissent's hand wringing, neither has been able to point to an example of any prior SEC enforcement action brought during the past 80 years that our holding today would have prevented the SEC from bringing. At oral argument, the Government referred to an administrative proceeding, In re Richard Line, 62 S.E.C. Docket 2879 (1996), as its best example. Our examination of the report of that case, however, indicates that the defendant was a fraudster to whom the fraud's victims had loaned money, expecting that he would purchase securities on their behalf. Id., at 2880 ("Line represented to investors that he would invest their non-admitted assets in various securities, including U.S. Treasury notes, mutual fund shares, and collateralized debt obligations"); ibid. ("[He] fabricated *395account statements which falsely recited that securities had been purchased on behalf of certain investors").

The Government's brief refers to two other proceedings as demonstrating the SEC's broad § 10(b) enforcement powers. Each, however, involved defrauded investors who had tried to take an ownership interest in the relevant securities. Jett, 82 S.E.C. Docket, at 1251 (involving a § 10(b) action where a defrauded trading firm's "decision to purchase or 'invest' in strips or bonds ... stemmed directly from the activity that constituted the fraud"); In re D.S. Waddy & Co., 30 S.E.C. 367, 368 (1949) (involving a § 10(b) action where a broker "appropriated to his own use money paid to him by customers for securities purchases"). We have examined SEC records without finding any further examples.

For these reasons, the dissent's warning that our decision will "inhibit" "litigants from using federal law to police frauds" and will "undermine the primacy of federal law in policing abuses in the securities markets" rings hollow. Post, at 1073 - 1074, 1074 - 1075. The dissent cannot point to one example of a federal securities action-public or private-that would have been permissible in the past *1071but that our approach will disallow in the future. And the irony of the dissent's position is that federal law would have precluded private recovery in these very suits, because § 10(b) does not create a private right of action for investors vis-à-vis "secondary actors" or "aiders and abettors" of securities fraud. Stoneridge Investment Partners, 552 U.S., at 152, 155, 128 S.Ct. 761; Central Bank of Denver, 511 U.S., at 180, 114 S.Ct. 1439; accord, Brief for Petitioners in No. 12-86, p. 46 ("Any federal securities action against Petitioners would clearly run afoul of Central Bank and Stoneridge "); Brief for Respondents 48 (same); Brief for United States as Amicus Curiae 28 (same).

III

Respondents' complaints specify that their claims rest upon their purchases of uncovered, not of covered, securities.

*396Our search for allegations that might bring their allegations within the scope of the Litigation Act reveals the following:

(1) The first set of Texas plaintiffs alleged that they bought certificates of deposit from Stanford International Bank because they were told "the CDs issued by SIB were safer even than U.S. bank-issued CDs" and "could be redeemed at any time," given that the Bank "only invested the money [i.e., the Bank's money obtained from its certificate sale proceeds] in safe, secure, and liquid assets." App. 433. They claimed Stanford "touted the high quality of SIB's investment portfolio," and such falsehoods were material to their decision to purchase the uncovered certificates. Id., at 444.

(2) The second set of Texas plaintiffs contended that they, too, purchased the Bank's certificates on the belief "that their money was being invested in safe, liquid investments." Id., at 715. They alleged that the Bank's marketing materials stated it devoted "the greater part of its assets" to "first grade investment bonds (AAA, AA+, AA) and shares of stock (of great reputation, liquidity, and credibility)." Id., at 744 (emphasis deleted).

(3) Both groups of Louisiana plaintiffs alleged that they were induced to purchase the certificates based on misrepresentations that the Bank's assets were " 'invested in a well-diversified portfolio of highly marketable securities issued by stable governments, strong multinational companies and major international banks.' " Id., at 253, 345. And they claimed the " 'liquidity/marketability of SIB's invested assets' " was "the most important factor to provide security to SIB clients." Id., at 254.

These statements do not allege, for Litigation Act purposes, misrepresentations or omissions of material fact "in connection with" the "purchase or sale of a covered security." At most, the complaints allege misrepresentations about the Bank's ownership of covered securities-fraudulent assurances that the Bank owned, would own, or would use the victims' money to buy for itself shares of covered securities.

*397But the Bank is an entity that made the misrepresentations. The Bank is the fraudster, not the fraudster's victim. Nor is the Bank some other person transacting (or refraining from transacting, see Dabit, 547 U.S., at 75-77, 126 S.Ct. 1503) in covered securities. And consequently, there is not the necessary " connection" between the materiality of the misstatements and the statutorily required "purchase or sale of a covered security." See supra, at 1076.

A final point: The District Court found that one of the plaintiffs acquired Bank certificates "with the proceeds of selling" covered securities contained in his IRA portfolio. App. to Pet. for Cert. in No. 12-86, p. 70. The plaintiffs, however, *1072did not allege that the sale of these covered securities (which were used to finance the purchase of the certificates) constituted any part of the fraudulent scheme. Nor did the complaints allege that Stanford or his associates were at all interested in how the plaintiffs obtained the funds they needed to purchase the certificates. Thus, we agree with the Court of Appeals that "[u]nlike Bankers Life and Zandford, where the entirety of the fraud depended upon the tortfeasor convincing the victims of those fraudulent schemes to sell their covered securities in order for the fraud to be accomplished, the allegations here are not so tied with the sale of covered securities." 675 F.3d, at 523. In our view, like that of the Court of Appeals, these sales constituted no relevant part of the fraud but were rather incidental to it.

For these reasons the Court of Appeals' judgment is affirmed.

It is so ordered.

Justice THOMAS, concurring.

I join the opinion of the Court on the understanding that the "misrepresentation[s] ... of ... material fact" alleged in this case are not properly considered "in connection with" transactions in covered securities. 15 U.S.C. § 78bb(f)(1)(A). We have said that the statutory phrase "in connection *398with" warrants a "broad interpretation," Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71, 85, 126 S.Ct. 1503, 164 L.Ed.2d 179 (2006), though not so broad as to reach any "common-law fraud that happens to involve securities," see SEC v. Zandford, 535 U.S. 813, 820, 122 S.Ct. 1899, 153 L.Ed.2d 1 (2002). Considered in isolation, however, that phrase "is essentially 'indeterminat[e]' because connections, like relations, 'stop nowhere.' " Maracich v. Spears, 570 U.S. ----, ----, 133 S.Ct. 2191, 2200, 186 L.Ed.2d 275 (2013) (some internal quotation marks omitted). The phrase thus "provides little guidance without a limiting principle consistent with the structure of the statute and its other provisions." Ibid. As I understand it, the opinion of the Court resolves this case by applying a limiting principle to the phrase "in connection with" that is "consistent with the statutory framework and design" of the Securities Litigation Uniform Standards Act of 1998, id., at ----, 133 S.Ct., at 2200, and also consistent with our precedents.

Justice KENNEDY, with whom Justice ALITO joins, dissenting.

A number of investors purchased certificates of deposit (CDs) in the Stanford International Bank (SIB). For purposes of this litigation all accept the premise that Allen Stanford and SIB induced the investors to purchase the CDs by fraudulent representations. In various state and federal courts the investors filed state-law suits against persons and entities, including attorneys, accountants, brokers, and investment advisers, alleging that they participated in or enabled the fraud. The defendants in the state-court suits removed the actions to federal court, where they were consolidated with the federal-court suits. The defendants contended that the state-law suits are precluded under the terms of the Securities Litigation Uniform Standards Act of 1998 (SLUSA or Act), 15 U.S.C. § 78bb(f)(1). As the investors prevailed in the Court of Appeals, they are the respondents here. The persons and entities who were defendants in the state-law actions are the petitioners. The investors *399contend the state-law suits are not precluded by SLUSA, and the petitioners contend the suits are precluded.

For purposes of determining SLUSA's reach, all can agree that the CD purchases would not have been, without more, transactions *1073regulated by that Act; for the CDs were not themselves covered securities. As a result, in determining whether the Act must be invoked, a further circumstance must be considered: The investors purchased the CDs based on the misrepresentations that the CDs were, or would be, backed by investments in, among other assets, covered securities.

What must be resolved, to determine whether the Act precludes the state-law suits at issue, is whether the misrepresentations regarding covered securities and the ensuing failure to invest in those securities were so related to the purchase of the CDs that the misrepresentations were "misrepresentation[s] or omission[s] of a material fact in connection with the purchase or sale of a covered security." 15 U.S.C. § 78bb(f)(1)(A).

The opinion for the Court, it seems fair to say, adopts this beginning framework, and it is quite correct to do so. The Court is further correct to view this litigation as involving a fraud of a type, scale, and perhaps sophistication that has not yet been addressed in its precedents with respect to the applicability of the federal securities laws.

It is the premise of this dissent that the more simple frauds addressed in this Court's precedents, where the Court did find fraud "in connection with the purchase or sale," are applicable here. In those cases, as here, the immediate cause of loss to the victim of the fraud was not simply a purchase or sale but rather a fraud that depended on the purchase or sale of securities or the promise to do so. It is submitted that this litigation should not come out differently simply because the fraud here was so widespread that many investors were misled by misrepresentations respecting investments, or promised investments, in regulated securities *400in the markets. And it is necessary to caution that, in holding otherwise, the Court adopts a new approach, an approach which departs from the rules established in the earlier, albeit simpler, cases. And, as a consequence, today's decision, to a serious degree, narrows and constricts essential protection for our national securities markets, protection vital for their strength and integrity. The result will be a lessened confidence in the market, a force for instability that should otherwise be countered by the proper interpretation of federal securities laws and regulations. Though the reasons supporting the Court's opinion are set forth with care and clarity, this respectful dissent submits that established principles do not support its holding.

I

It must be determined whether the misrepresentations to the investors-misrepresentations that led them to buy CDs in the belief they could rely on the expertise and sophistication of Stanford and SIB in the national securities markets-were "misrepresentation[s] or omission[s] of ... material fact[s] in connection with the purchase or sale of a covered security." 15 U.S.C. § 78bb(f)(1). This is the central provision of SLUSA for purposes of this litigation. The Court's precedents instruct that this language has broad application and must be construed flexibly in order to encompass new and ever more ingenious fraudulent schemes. Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71, 85, 126 S.Ct. 1503, 164 L.Ed.2d 179 (2006) ; SEC v. Zandford, 535 U.S. 813, 819, 122 S.Ct. 1899, 153 L.Ed.2d 1 (2002). The Court has held that a material misrepresentation is made "in connection with the purchase or sale" of a security when the "fraud coincided with the sales [or purchases] themselves." Zandford, supra, at 820, 122 S.Ct. 1899.

*1074This significant language must apply here in order to implement two of Congress' purposes in passing SLUSA. First, SLUSA seeks to preclude a broad range of state-law securities claims in order to protect those who advise, counsel, and otherwise assist investors from abusive and multiplicitous *401class actions designed to extract settlements from defendants vulnerable to litigation costs. This, in turn, protects the integrity of the markets. Second, even as the Act cuts back on the availability of state-law securities claims, a fair interpretation of its language ensures robust federal regulation of the national securities markets. That is because, in designing SLUSA, Congress "imported the key phrase" from § 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission (SEC) Rule 10b-5, which provide a private cause of action, as well as SEC enforcement authority, for securities fraud. Dabit, 547 U.S., at 79, 85, 126 S.Ct. 1503. As a result, that language must be " 'presumed to have the same meaning' " in SLUSA as it does in those contexts. Id., at 86, 126 S.Ct. 1503.

The Court's narrow interpretation of the Act's language will inhibit the SEC and litigants from using federal law to police frauds and abuses that undermine confidence in the national securities markets. Throughout the country, then, it will subject many persons and entities whose profession it is to give advice, counsel, and assistance in investing in the securities markets to complex and costly state-law litigation based on allegations of aiding or participating in transactions that are in fact regulated by the federal securities laws.

A

Congress enacted SLUSA and its predecessor, the Private Securities Litigation Reform Act of 1995, to reform "perceived abuses of the class-action vehicle in litigation involving nationally traded securities." Dabit, 547 U.S., at 81, 126 S.Ct. 1503. Congress found that these abuses were being used "to injure 'the entire U.S. economy.' " Ibid. The Act and its predecessor together addressed these problems by limiting damages, imposing heightened pleading standards, and, as most relevant here, precluding state-law claims involving nationally traded securities. 112 Stat. 3227; see S.Rep. No. 104-98, pp. 19-20 (1995) ; H.R.Rep. No. 105-640, p. 10 (1998) ; S.Rep. No. 105-182, pp. 3-4 (1998).

*402In light of the Act's objectives, the Act must be given a "broad construction," because a "narrow reading of the statute would undercut the effectiveness" of Congress' reforms. Dabit, supra, at 86, 126 S.Ct. 1503. Today's decision does not heed that principle. The Court's narrow reading of the statute will permit proliferation of state-law class actions, forcing defendants to defend against multiple suits in various state fora. This state-law litigation will drive up legal costs for market participants and the secondary actors, such as lawyers, accountants, brokers, and advisers, who seek to rely on the stability that results from a national securities market regulated by federal law. See Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 189, 114 S.Ct. 1439, 128 L.Ed.2d 119 (1994). This is a serious burden to put on attorneys, accountants, brokers, and investment advisers nationwide; and that burden itself will make the national securities markets more costly and difficult to enter. The purpose of the Act is to preclude just these suits. By permitting the very state-law claims Congress intended to prohibit, the Court will undermine the primacy of federal law in policing abuses in the securities markets.

*1075The Court casts its rule as allowing victims to recover against secondary actors under state law when they would not be able to recover under federal law due to Central Bank . Ante, at 1078, 1081. But in Dabit a unanimous Court rejected that conception of SLUSA. A federal-law claim was not available to the plaintiffs in Dabit because Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975), limited the Rule 10b-5 private right of action to purchasers and sellers, not holders. "[T]he Second Circuit held that SLUSA only pre-empts state-law class action claims brought by plaintiffs who have a private remedy under federal law." 547 U.S., at 74, 126 S.Ct. 1503. The Court held the opposite, "concluding that SLUSA pre-empts state-law holder class-action claims." Id., at 87, 126 S.Ct. 1503."It would be odd, to say the least," the Court reasoned, "if SLUSA exempted that particularly troublesome subset of class actions from its pre-emptive sweep."

*403Id., at 86, 126 S.Ct. 1503. The Court in Dabit also noted that SLUSA preclusion does not leave victims with "no" ability to "recover damages under state law." Ante, at 1072 - 1073. Rather, "[i]t simply denies plaintiffs the right to use the class-action device to vindicate certain claims." 547 U.S., at 87, 126 S.Ct. 1503. The Court in Dabit precluded the suit at issue in order to effect the purpose of Blue Chip . By following the opposite course today, the Court revisits Dabit 's logic and undermines Central Bank .

B

Congress intended to make "federal law, not state law, ... the principal vehicle for asserting class-action securities fraud claims." Dabit, supra, at 88, 126 S.Ct. 1503. And a broad construction of the "in connection with" language found in both SLUSA and Rule 10b-5 ensures an efficient and effective federal regulatory regime, one equal to the task of deterring and punishing fraud and providing compensation for victims.

In undertaking regulation of the national markets during the Great Depression, Congress sought to eliminate the "abuses which were found to have contributed to the stock market crash of 1929 and the depression of the 1930's." SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 186, 84 S.Ct. 275, 11 L.Ed.2d 237 (1963). " 'It requires but little appreciation ... of what happened in this country during the 1920's and 1930's to realize how essential it is that the highest ethical standards prevail' in every facet of the securities industry." Id., at 186-187, 84 S.Ct. 275 (quoting Silver v. New York Stock Exchange, 373 U.S. 341, 366, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963) ). In the Securities Exchange Act, Congress sought " 'to achieve a high standard of business ethics in the securities industry' " by " 'substitut[ing] a philosophy of full disclosure for the philosophy of caveat emptor .' " Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 151, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972). To that end, Congress enacted § 10(b) "to insure honest securities markets and thereby promote investor confidence." United States v. O'Hagan, 521 U.S. 642, 658, 117 S.Ct. 2199, 138 L.Ed.2d 724 (1997).

*404Investor confidence indicates fair dealing and integrity in the markets. See Dabit, supra, at 78, 126 S.Ct. 1503; O'Hagan, supra, at 658, 117 S.Ct. 2199; see also Central Bank, supra, at 188, 114 S.Ct. 1439. It also is critical to achieving an efficient market. The corollary to the principle that insider trading and other frauds have an " inhibiting impact on market participation" is that investor confidence in strong federal regulation to prevent these abuses inspires participation in the market. See *1076O'Hagan, supra, at 659, 117 S.Ct. 2199. Widespread market participation in turn facilitates efficient allocation of capital to the Nation's companies. See also Central Bank, supra, at 188, 114 S.Ct. 1439.

C

Mindful of the ends of both SLUSA and Rule 10b-5, the Court's precedents interpret the key phrase in both laws to mean that a "misrepresentation or omission of a material fact" is made "in connection with the purchase or sale" of a security when the "fraud coincided with the sales [or purchases] themselves." Zandford, 535 U.S., at 820, 122 S.Ct. 1899; see also Dabit, supra, at 85, 126 S.Ct. 1503.

This litigation is very similar to Zandford and satisfies the coincides test it sets forth, and for similar reasons. In Zandford, the SEC brought a civil action against a broker, who, over a period of time, gained control of an investment account, sold its securities, and then pocketed the proceeds. 535 U.S., at 815-816, 122 S.Ct. 1899. The broker argued that "the sales themselves were perfectly lawful and that the subsequent misappropriation of the proceeds, though fraudulent, is not properly viewed as having the requisite connection with the sales." Id., at 820, 122 S.Ct. 1899. The Court rejected that argument. Although the transactions were lawful and separate from the misappropriations, the two were "not independent events." Ibid. Rather, the fraud "coincided with the sales," in part because the sales "further[ed]" the fraud. Ibid.

The Court likened the broker's fraud to that in Superintendent of Ins. of N.Y. v. Bankers Life & Casualty Co., 404 U.S. 6, 10, 92 S.Ct. 165, 30 L.Ed.2d 128 (1971), where the fraud victims were misled to *405believe that they "would receive the proceeds of the sale" of securities. Zandford, 535 U.S., at 821, 122 S.Ct. 1899. Like the victims in Bankers Life, the victims in Zandford "were injured as investors through [the broker]'s deceptions" because "[t]hey were duped into believing that [the broker] would 'conservatively invest' their assets in the stock market and that any transactions made on their behalf would be for their benefit." Id., at 822, 122 S.Ct. 1899. Both suffered losses because they were victims of dishonest intermediaries or fiduciaries. See also In re Richard J. Line, 62 S.E.C. Docket 2879 (1996) (broker who induced parents to transfer funds to him to invest in securities so as to temporarily hide them during the college financial aid application process, but then failed to return the money, violated Rule 10b-5).

Here, just as in Zandford, the victims parted with their money based on a fraudster's promise to invest it on their behalf by purchases and sales in the securities markets. The investors had-or were led to believe they could have-the advantages of Stanford's and SIB's expertise in investments in the national market. So here, as in Zandford, the success of the fraud turned on the promise to trade in regulated securities. According to the complaints, SIB represented that it would " 're-inves[t]' " the plaintiffs' money on their behalf in "a well-diversified portfolio of highly marketable securities issued by stable national governments, strong multinational companies, and major international banks" to ensure a "safe, liquid," and above-market return. See App. 244, 249, 250, 253, 336, 342, 345, 444, 470, 480, 628. The misrepresentation was about nationally traded securities and lent credence to SIB's promise that the CDs were a liquid investment that "could be redeemed with just a few days' notice." See id., at 253, 345, 445, 628. The CDs, SIB explained, would be backed by nationally traded securities. As a result, according to the complaints, the misrepresentation was "material."

*1077Id., at 244-245, 336-338, 480, 715. The fraud could not have succeeded without the misrepresentation *406: The investors gave SIB money because they expected it to be invested in the national securities markets. The connection between the promised purchases and the misrepresentation is more direct than in Zandford, because the misrepresentation was essential to the fraud.

Here, and again just as in Zandford, the fraud was not complete until the representation about securities transactions became untrue, just as Stanford intended all along. Instead of purchasing covered securities, SIB purchased some but fewer covered securities than it promised-only 10% of its portfolio, according to an affidavit attached to a complaint-and primarily speculated in Caribbean real estate. Brief for Respondents 37; App. 594; but see Tr. of Oral Arg. 43-44 (suggesting SIB did not purchase securities). It was not until SIB rendered the CDs illiquid by failing to make substantial investments in the nationally traded securities it promised that the fraud was consummated. At that point, SIB blocked the plaintiffs' access to the market. The fraud and SIB's failure to purchase all that it promised were not independent events. Rather, the false promises to invest in covered securities enabled and furthered the CD fraud. Without the false promise, there would have been no money to purchase the covered securities. On these facts, this Court's controlling precedents instruct that these misrepresentations were made "in connection with the purchase or sale" of regulated securities; and, as a result, state-law claims concerning them should be precluded.

Dabit provides further support for this conclusion. There, the Court held that an investment bank that deceived brokers into advising their clients to hold covered securities made misrepresentations "in connection with the purchase or sale of a covered security." "Under our precedents," the Court explained, "it is enough that the fraud alleged 'coincide' with a securities transaction-whether by the plaintiff or by someone else." 547 U.S., at 85, 126 S.Ct. 1503. It did not matter that the plaintiffs did not purchase or sell securities, because *407they were participants in the national markets: " The requisite showing, in other words," is " 'deception "in connection with the purchase or sale of any security," not deception of an identifiable purchaser or seller.' " Ibid. (quoting O'Hagan, 521 U.S., at 658, 117 S.Ct. 2199). Here, for like reasons, it does not matter that the fraud victims, as opposed to Stanford and SIB, were not the ones to fail to invest in the market. The very essence of the fraud was to induce purchase of the CDs on the (false) promise that investors should rely on SIB's special skills and expertise in making market investments in covered securities on their behalf. If promises related to covered securities are integral to the fraud in this direct way, federal regulation is necessary if confidence in the market is to be maintained.

That interest is at stake here. Because confidence in the ability to act as an investor without diversion of funds by intermediaries and insiders is critical, it does not matter if the victim of a fraud does not purchase or sell a security, Dabit,supra, at 85, 126 S.Ct. 1503; or if the sale or purchase does not occur at the same time as the deception, Bankers Life, 404 U.S., at 12-13, 92 S.Ct. 165; or if no party to the actual transaction is deceived by the fraud, O'Hagan, supra, at 656, 117 S.Ct. 2199; or if the misrepresentation has nothing to do with the value of a covered security, Zandford, 535 U.S., at 820, 122 S.Ct. 1899. An investor's confidence in the market, and willingness to participate in it, may be severely undermined if frauds like the one *1078here are not within the reach of federal regulation. Frauds like this one undermine investor confidence in attorneys, accountants, brokers, and investment advisers, the intermediaries on whom investors depend to gain access to the market. And when frauds are as widespread as this one, the market as a whole is weakened because investors, including sophisticated ones, are misled as to the amount of funds committed to the market and its consequent stability and resilience.

The rule that SLUSA applies when a misrepresentation about the market is coincident to the fraud is, then, *408essential to the framework of the Act and to federal securities regulation. Fraudulent practices " 'constantly vary,' " and " 'practices legitimate for some purposes may be turned to illegitimate and fraudulent means.' " Bankers Life, supra, at 12, 92 S.Ct. 165. That is why the key language "should be construed not technically and restrictively, but flexibly to effectuate its remedial purposes." Zandford,supra, at 819, 122 S.Ct. 1899 (internal quotation marks omitted); see Affiliated Ute, 406 U.S., at 151, 92 S.Ct. 1456. The language merits a "broad interpretation" because it is part of a residuary provision that must be able to accommodate evolving methods of fraud by intermediaries and insiders in ever more complicated securities markets. Central Bank, 511 U.S., at 174, 114 S.Ct. 1439. Its interpretation should not privilege fraudsters who devise ever more devious methods of committing fraud involving covered securities.

At the same time, the submitted interpretation is not so broad as to "convert every common-law fraud that happens to involve securities into a violation of § 10(b)" or preclude all state tort claims that involve securities in a tangential way. Zandford, supra, at 820, 122 S.Ct. 1899. So, for example, the statutory language does not extend to cover a thief who steals money from a store to buy securities or to a fraudster who defrauds a bank for a loan that he uses to buy securities. See O'Hagan, supra, at 656, 117 S.Ct. 2199. The victims in those cases are not concerned about their ability to act as investors but rather about their duties as a store clerk or a loan officer. Those frauds involve securities transactions only as happenstance. As a result, the interpretation submitted in this dissent strikes the balance that Congress intended between forbidding frauds by intermediaries in the market without reaching frauds that touch the markets in only tangential ways.

The key question is whether the misrepresentation coincides with the purchase or sale of a covered security or the purchase or sale of the securities is what enables the fraud. Stanford's misrepresentation did so. Stanford promised to *409purchase covered securities for investors, using his special expertise, thus allowing investors to rely on his skill to participate in the national securities markets. The entire scheme rested on investors falling for the trick. When covered securities are so integral to the fraud, the false promise is incident to the purchase or sale of regulated securities because it coincides with it, and the misrepresentation respecting national securities enabled the fraud.

D

The Court interprets the phrase "misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security"-the key phrase in SLUSA and Rule 10b-5-in a different manner. The result, it is submitted, is inconsistent with the statutory scheme Congress enacted and casts doubt on the applicability of federal securities law to cases of serious securities fraud.

*1079The Court construes the text of SLUSA and Rule 10b-5 to require a misrepresentation that "is material to a decision by one or more individuals (other than the fraudster) to buy or sell a 'covered security.' " Ante, at 1066. The Act simply does not say that the purchase or sale-or the promise to make a purchase or sale-must be by one other than the fraudster. Rather the Act states that there must be "a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security." 15 U.S.C. § 78bb(f)(1)(A). See 17 C.F.R. § 240.10b-5 (2013) (requiring an "untrue statement of a material fact" "in connection with the purchase or sale of any security"). The Court narrows the statute Congress wrote in two ways. It excises the important "in connection with" language, resulting in a confined reading inconsistent with the Act's purpose, structure, and operation. And, by requiring the purchase or sale be made by someone "other than the fraudster," the Court inserts a limiting phrase that nowhere appears in the language of the provisions. In litigation like this, this new rule has it upside down. When the violation that adversely affects *410the securities market is done by the fraudster himself, that is all the more reason for applying federal law. This is not a case where Congress has limited its coverage to a certain subset of purchasers. Congress enacted such a limit two subsections later in SLUSA when detailing which actions are not precluded. See 15 U.S.C. § 78bb(f)(3)(A)(ii)(I) ("the purchase or sale of securities by the issuer or an affiliate of the issuer exclusively from or to holders of equity securities of the issuer"). But it did not do so in the provision at issue.

The Court's reconstruction of the language of the provisions also casts doubt on the applicability of federal securities law to three established instances of federal securities fraud and one instance of preclusion under the Act as adjudged by the Court and the SEC in earlier cases.

First, the Court's interpretation necessarily suggests that Zandford is incorrect and that dishonest brokers need not fear Rule 10b-5 liability. The deceit in Zandford was that the broker would act as the victim's fiduciary when in fact he planned on selling (and did sell) the investor's securities for his own benefit. 535 U.S., at 820, 122 S.Ct. 1899; see also Line, 62 S.E.C. Docket 2879 (broker's deceit was false promise to buy). The Court's rule that liability must rest on a finding that someone other than the fraudster purchased or sold securities is inconsistent with Zandford, where the recipient of the misrepresentation did not buy or sell. The Court's opinion disregards the hazards to the market when the fraudster is the one acting in the market and frustrates the investment objectives of his victims.

Second, the Court's interpretation is difficult to reconcile with liability for insider trading. In O'Hagan, the Court held that the "in connection with" 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," "even though the person or entity defrauded is not the other party to the trade."

*411521 U.S., at 656, 117 S.Ct. 2199. The Court's requirement that someone other than the fraudster purchase or sell a security is hard to square with O'Hagan .

Third, the Court's interpretation is difficult to square with the SEC's position in In re Orlando Joseph Jett, 82 S.E.C. Docket 1211 (2004). There, the SEC held liable a trader who fabricated complex trades to supplement the returns of his real trades, so as to increase his standing in his company. The SEC likened Jett to "garden-*1080variety securities fraud cases in which a broker-dealer or investment adviser engages in unsuccessful securities trades for a client and then hides the losses or inflates the profits by sending out false account statements." Id., at 1253. The decision of the Court today would require that Jett's misrepresentation led to the purchase or sale of securities by someone other than Jett. But the SEC found Jett's own purchases and sales to be sufficient to come within the securities laws.

Finally, the Court's analysis is inconsistent with the unanimous opinion in Dabit, which interpreted the same statutory language at issue in this litigation. Dabit squarely rejected the view that "an alleged fraud is 'in connection with' a purchase or sale of securities only when the plaintiff himself was defrauded into purchasing or selling particular securities." 547 U.S., at 85, 126 S.Ct. 1503. Instead, it approved the SEC's interpretation that a broker who " 'sells customer securities with intent to misappropriate the proceeds' " satisfies the "in connection with the purchase or sale" requirement. Ibid., n. 10.Dabit cannot be reconciled with today's decision to require someone other than the fraudster buy or sell a security.

It is correct that there is no case precisely standing for the proposition that a victim does not have to take an ownership position. However, O'Hagan supports that view. O'Hagan clearly states that in insider trading cases "the person or entity defrauded is not the other party to the trade." 521 U.S., at 656, 117 S.Ct. 2199. And in Zandford a fraudster told customers he would invest "their money" in securities and then sold *412those securities. 535 U.S., at 815, 122 S.Ct. 1899. Here the fraudster told plaintiffs that he would "re-invest" "their" money in securities and then bought different securities. App. 250, 470, 715. The only difference is that there the fraudster sold and here he bought. Federal regulation should not turn on whether a fraudster arrives before or after an investor makes his first purchase.

II

The Court's interpretation also introduces confusion into securities law by not defining what it means for someone "other than the fraudster to buy or sell" a security, a rule that it derives from its view that the precedents all involve victims who had an ownership interest in securities. Ante, at 1076 - 1077. The precedents the Court cites involve what the parties have called direct ownership, where the victim buys or sells an entire equity. By using the term ownership interest instead of ownership, the Court also appears to accept the respondents' concession that indirect ownership, where the victim buys or sells shares in a defendant fund that itself owns equities, is sufficient in certain circumstances, such as when a victim has "some interest in the defendant's supposed portfolio." Brief for Respondents 16.

An ownership rule distinguishing between different types of indirect ownership is unworkable. Indirect ownership is a common type of investment. See M. Fink, The Rise of Mutual Funds 1 (2008) (U.S. mutual funds have over 88 million American shareholders and over $11 trillion in assets). Yet whether indirect ownership involves an interest in the underlying equities is a complex question of corporation, LLC, or partnership law. See In re Bernard L. Madoff Inv. Securities LLC, 708 F.3d 422, 427 (C.A.2 2013). Congress likely did not intend preclusion of state-law suits to depend on the complexities of the Delaware Code.

The Court's ownership approach also casts doubt on the scope of Rule 10b-5. Under the Court's interpretation, § 10(b) applies to fraudulent mutual or hedge *1081funds not *413because those funds invest in securities but because investments in the funds are securities. But not all such investments are securities. 2 L. Ribstein & R. Keatinge, Limited Liability Companies § 14:2 (2010) (discussing test for a security from SEC v. W.J. Howey Co., 328 U.S. 293, 66 S.Ct. 1100, 90 L.Ed. 1244 (1946) ); 1 H. Bloomenthal & S. Wolff, Securities Law Handbook §§ 2:3 to 2:4 (2010). For those that are not, the Court seems to envision liability only when the investment confers an ownership interest in the fund's securities. And the general rule for investments in funds organized as LLPs and LLCs is that they do not convey such claims. 1 Ribstein & Keatinge, supra, § 7:11; see In re Herald, 730 F.3d 112 (C.A.2 2013). As a result, in important instances Rule 10b-5 may not extend to mutual and hedge funds under the Court's interpretation.

It is true that the SEC pursued the fraudster with success here. But that is because the CDs are securities. See Order Denying Motion to Dismiss in SEC v. Stanford International Bank, No. 3-09-CV-0298-N (N.D.Tex., Nov. 30, 2011), pp. 5-10. This aspect of Stanford's fraud is not a necessary feature of all frauds involving funds similar to SIB.

III

The fraudster in this litigation misrepresented that he would purchase nationally traded securities. That misrepresentation was made "in connection with the purchase or sale" of the promised securities because it coincided with them. The fraud turned on the misrepresentation. The Court's contrary interpretation excises the phrase "in connection with" from the Act, a phrase that the Court in earlier cases held to require a broad and flexible meaning. At the same time, by holding that the purchase or sale of securities be made by someone other than the fraudster, the Court engrafts a limitation that does not appear in the text. The result is to constrict the application of federal securities regulation in instances where dishonest brokers, insider traders, and lying employees purchase or sell securities, or promise *414to do so, as part of the fraud. Today's decision introduces confusion in the enforcement of securities laws.

For these reasons, it is submitted that the judgment of the Court of Appeals should be reversed.