O'Hagan (D) was a partner in Dorsey & Whitney a law firm that represented Grand Met. Grand Met retained Dorsey & Whitney for a potential buyout of Pillsbury. Both Grand Met and Dorsey & Whitney took precautions to protect the confidentiality of Grand's tender offers. D did not work on the transactions. Dorsey & Whitney withdrew from representation of Grand Met on September 9, 1988, and on October 4, 1988, Grand Met announced its tender offer for Pillsbury. On August 18, D began purchasing call options for Pillsbury stock. By the end of September, he owned 2,500 unexpired Pillsbury options, more than any other individual investor did. D also purchased 5000 shares of Pillsbury stock under $39 per share. When Grand Met announced, the price of the stock went to $60, and D sold his options for a $4.3 million profit. The SEC investigated, and D was charged with a 57-count indictment in which he used the profits from the Grand Met transactions to conceal embezzlement and conversion of unrelated client trust funds. The 57 counts included 20 for mail fraud, 17 in violation of 10b rules and 17 counts of violation of 14 (e) and 3 counts of money laundering. D was found guilty and sentenced to 47 months. The appeals court reversed all of D's convictions. Liability under 10b-5 may not be grounded on the misappropriation theory, and Rule 14 (e)-3(a) exceeds the SEC's rulemaking authority in that the rule contains no breach of fiduciary duty requirement. The mail fraud and money laundering convictions also fell because they were predicated on the Rule violations. The Supreme Court granted certiorari.