6.1.8.2. Rule 10b-5
Section 10(b) of the Exchange Act grants authority to the SEC to prohibit the use of any “manipulative or deceptive device or contrivance” in connection with a securities transaction. The SEC seized this authority to promulgate Rule 10b-5, which states the following:
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 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.
A quick glance at the rule reveals three important points:
•First, the rule constitutes a very broad prohibition against all kinds of deceptiv