The Supreme Court has addressed the perplexing labyrinth of securities fraud since the enactment of the Securities and Exchange Acts of 1933 and 1934 ("Exchange Act"). In 1976, the president of a small brokerage firm induced customers to invest in fictitious escrow accounts, promising high yields to shareholders. The following year, majority shareholders of a Delaware lumber company instituted a merger based on what the minority shareholders deemed a fraudulent appraisal of the company's assets. In 1980, a financial printer profited from his purchase and subsequent sale of shares in companies targeted for corporate takeovers.

Part II of this Note outlines the judicial development of the misappropriation theory and the objectives of the tender offer legislation. Part III presents the issues confronting the Supreme Court in O'Hagan and explains the Court's conclusions. Part IV analyzes the Court's holding and assesses how its approval of the misappropriation theory and its interpretation of the SEC's ability to apply Rule 14e-3(a) will impact fraudulent activity in secutities transactions.'