Whether the misappropriation theory is a permissible basis for liability under section 10(b) of the Securities Exchange Act is an issue that has split the U.S. Courts of Appeals. The issue turns on the statutory interpretation of section 10(b) and Rule 10b-5, as well as policy considerations. The Supreme Court finally settled the issue in United States v. O'Hagan, when it reversed the Eighth Circuit and permitted the United States government to base section 10(b) liability on the misappropriation theory. The effect of the Court's decision is to make a person liable under section 10(b) if he received material and non- public information from someone to whom he owed a fiduciary duty, traded in securities for his personal profit based on such information, and did so without disclosing his trading activities to the fiduciary.

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