445 U.S. 222 (1980)
Chiarella v. United States is a foundational Supreme Court decision defining the limits of insider trading liability under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.
Whether a person who is not an insider of the corporation in whose securities he trades, and who owes no fiduciary or similar duty of trust and confidence to the sellers of those securities, violates §10(b) and Rule 10b-5 by trading on material nonpublic information obtained through his employment without disclosing that information to the sellers.
Under §10(b) and Rule 10b-5, liability for nondisclosure in securities trading arises only where there is a duty to disclose, which stems from a fiduciary or similar relationship of trust and confidence between the parties to the transaction. There is no general duty to abstain from trading on material nonpublic information or to disclose such information to the market absent such a duty. Silence becomes fraudulent only when one party has a duty to speak to the other.
No. Because Chiarella was not an insider of the target companies and did not owe a fiduciary or similar duty of trust and confidence to the sellers of the target companies' stock, his silence was not a fraudulent omission under §10(b) and Rule 10b-5. The Supreme Court reversed his conviction, rejecting an "equal access" theory and declining to affirm on a misappropriation theory that had not been submitted to the jury.
Chiarella is a cornerstone of insider trading doctrine. It rejects an equal-access paradigm and insists that 10b-5 liability for omissions requires a fiduciary or similar duty, thereby shaping the classical theory of insider trading. The case also catalyzed two major developments: (1) the Supreme Court's later elaboration of tipper–tippee liability in Dirks v. SEC, and (2) recognition of the misappropriation theory in United States v. O'Hagan, which addresses trading based on confidential information misused against its source. Practically, the decision prompted the SEC to adopt Rule 14e-3, a tender-offer-specific prohibition on trading on material nonpublic tender-offer information, even absent a fiduciary duty, closing the precise gap exploited by Chiarella. For law students, the case supplies the duty-based framework that undergirds modern insider trading law and remains essential to analyzing omission-based 10b-5 claims.