the CRWQCB in its order of May 24, 1976 (incorporating within the Hyperion permit a four-phase alternative sludge disposal plan to be completed by April 1, 1980) has been approved by the EPA with respect to the federal permit. The EPA presently takes the position that state modifications of the sludge-out plan, adopted pursuant to California law, did not alter the initial compliance schedule incorporated in the 1975 federal permit. The agency's position will be tested in United States v. City of Los Angeles, No. CV 77 3047 R (CD Cal., filed Aug. 12, 1977), an enforcement action brought by the Government under § 309 of the FWPCA, 86 Stat. 859, 33 U. S. C. § 1319 (1976 ed. and Supp. II).

The enforcement action seeks to enjoin the city from violating the conditions of its permit and to impose civil penalties against the city for past failures to comply with the permit's schedules. App. 181. It has been stayed by the Court of Appeals pending the outcome of this case. Brief for Petitioner 17, n. 13. The argument that the city raises here concerning its understanding of the compliance schedules will be resolved far more effectively in the Government's enforcement action than in the adjudicatory hearing the Court of Appeals would have awarded respondents in this case.13 Furthermore, even if the city had raised its argument in a public hearing on the proposed permit extension, that argument would have had little relevance to the EPA's final determination because the EPA's proposed action did not purport to change the substantive conditions that are the focus of the city's complaint. Finally, respondents suggest that the EPA erred in not holding an adjudicatory hearing on the issues raised in respondent Kilroy's request. We agree with petitioner, however, who contends that Kilroy's request raised legal, rather

13 The Court of Appeals' stay of the compliance schedules incorporated within the 1975 permit did not remove the basis for the Government's enforcement action. That action challenges several alleged violations of the Hyperion NPDES permit that predated January 1, 1977. App. 183187. See n. 10, supra.

than factual, issues, and who notes that respondents treated the request in that fashion in arguing the issues Kilroy presented before the EPA's General Counsel. See n. 9, supra. Even in their arguments before this Court, respondents have continued to raise factual issues that are relevant only to their contention that greater adverse effects on both the marine and land environment will result from the Interim Sludge Disposal Project than from the continued discharge of sludge into the ocean. If such issues had been raised in a timely request for an adjudicatory hearing, we agree with petitioner that the EPA could have taken the position that such issues, regardless of their merits, were not pertinent to a determination to extend the Hyperion permit's expiration date. That determination had no impact on the compliance schedule for "sludge-out" that already had long been in effect."

C

In sum, we hold that the Court of Appeals erred in concluding that the EPA is required to hold a public hearing on every NPDES permit action it takes unless it can show that the material facts supporting its action "are not subject to

14 Respondents' litigation strategy throughout the proceedings culminating in this opinion seems to have been based, at least in part, on a fear that the EPA may evade further public scrutiny of the compliance schedules incorporated within the 1975 NPDES permit by issuing continued extensions of that permit rather than acting upon the city's application for a new permit. See supra, at 205-206. If that potential for evasion ever did exist, it was a limited one. Under § 402 (b) (1) (B) of the FWPCA, the EPA could have set the expiration date for the initial 1975 permit as late as August 1980, and the agency actions that culminated in this lawsuit would have been unnecessary. Now that the outside date for extensions of the 1975 permit is approaching, any additional extension for purposes of avoiding further hearings on the permit's compliance schedules would have little practical impact. We note, as well, that Los Angeles, under the Administrative Procedure Act, 5 U. S. C. § 706 (1) (a reviewing court shall "compel agency action unlawfully withheld or unreasonably delayed") may obtain judicial review of prolonged agency inaction with respect to its application for a new permit.

dispute." We hold, rather, that the agency's regulations implementing the statutory requirement of "an opportunity for public hearing" under § 402 of the FWPCA are valid. Respondents have failed to demonstrate that those regulations were not applied properly in the context of this case. The Court of Appeals' judgment remanding the case to the agency for an adjudicatory hearing on the EPA's extension of the expiration date of Los Angeles' NPDES permit for its Hyperion Wastewater Treatment Plant is reversed.

It is so ordered.

Syllabus

445 U.S.

CHIARELLA v. UNITED STATES

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE

SECOND CIRCUIT

No. 78-1202. Argued November 5, 1979-Decided March 18, 1980

Section 10 (b) of the Securities Exchange Act of 1934 prohibits the use "in connection with the purchase or sale of any security. . . [of] any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe." Rule 10b-5 of the Securities and Exchange Commission (SEC), promulgated under § 10 (b), makes it unlawful for any person to "employ any device, scheme, or artifice to defraud," or 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." Petitioner, who was employed by a financial printer that had been engaged by certain corporations to print corporate takeover bids, deduced the names of the target companies from information contained in documents delivered to the printer by the acquiring companies and, without disclosing his knowledge, purchased stock in the target companies and sold the shares immediately after the takeover attempts were made public. After the SEC began an investigation of his trading activities, petitioner entered into a consent decree with the SEC in which he agreed to return his profits to the sellers of the shares. Thereafter, petitioner was indicted and convicted for violating § 10 (b) of the Act and SEC Rule 10b-5. The District Court's charge permitted the jury to convict the petitioner if it found that he willfully failed to inform sellers of target company securities that he knew of a forthcoming takeover bid that would make their shares more valuable. Petitioner's conviction was affirmed by the Court of Appeals.

Held: Petitioner's conduct did not constitute a violation of § 10 (b), and hence his conviction was improper. Pp. 225-237.

(a) Administrative and judicial interpretations have established that silence in connection with the purchase or sale of securities may operate as a fraud actionable under § 10 (b) despite the absence of statutory language or legislative history specifically addressing the legality of nondisclosure. However, such liability is premised upon a duty to disclose (such as that of a corporate insider to shareholders of his cor

poration) arising from a relationship of trust and confidence between parties to a transaction. Pp. 225-230.

(b) Here, petitioner had no affirmative duty to disclose the information as to the plans of the acquiring companies. He was not a corporate insider, and he received no confidential information from the target companies. Nor could any duty arise from petitioner's relationship with the sellers of the target companies' securities, for he had no prior dealings with them, was not their agent, was not a fiduciary, and was not a person in whom the sellers had placed their trust and confidence. A duty to disclose under § 10 (b) does not arise from the mere possession of nonpublic market information. Pp. 231–235.

(c) This Court need not decide whether petitioner's conviction can be supported on the alternative theory that he breached a duty to the acquiring corporation, since such theory was not submitted to the jury. The jury instructions demonstrate that petitioner was convicted merely because of his failure to disclose material, nonpublic information to sellers from whom he bought the stock of target corporations. The conviction cannot be affirmed on the basis of a theory not presented to the jury. Pp. 235-237.

588 F.2d 1358, reversed.

POWELL, J., delivered the opinion of the Court, in which STEWART, WHITE, REHNQUIST, and STEVENS, JJ., joined. STEVENS, J., filed a concurring opinion, post, p. 237. BRENNAN, J., filed an opinion concurring in the judgment, post, p. 238. BURGER, C. J., filed a dissenting opinion, post, p. 239. BLACKMUN, J., filed a dissenting opinion, in which MARSHALL, J., joined, post, p. 245.

Stanley S. Arkin argued the cause for petitioner. With him on the briefs were Mark S. Arisohn and Arthur T. Cambouris.

Stephen M. Shapiro argued the cause for the United States. With him on the brief were Solicitor General McCree, Assistant Attorney General Heymann, Deputy Solicitor General Geller, Sara Criscitelli, John S. Siffert, Ralph C. Ferrara, and Paul Gonson.*

*Arthur Fleischer, Jr., Harvey L. Pitt, Richard A. Steinwurtzel, and Richard O. Scribner filed a memorandum for the Securities Industry Association as amicus curiae.