This Note argues that broadening the present embezzlement model of the Rule 10b- 5 misappropriation theory will more fully reflect both the language and intent of § 10(b) (of the 1934 Securities Exchange Act) and Rule 10b-5, and more importantly accommodate the sophistication of today's insider trading schemes. Part II of this Note examines the uses of inside information both prior to and after the creation of the 1934 Securities Exchange Act, and how § 10(b) and Rule 10b-5 were created to proscribe these uses. Part III examines the language and intent behind § 10(b) and Rule 10b-5 and argues that their language and intent legitimates a broader sanction regime which is necessary to combat the present sophistication of insider trading. Part IV examines the criticisms of the present embezzlement model of the Rule 10b-5 misappropriation theory as expressed by Justices Scalia and Thomas, and shows how a broader form of criminal liability is necessary despite these criticisms.
Theodore C. McCullough, United States v. O'Hagan: Defining the Limits of Fraud and Deceptive Pretext Under Rule 10b-5, 22 SEATTLE U. L. REV. 311 (1998).