In Chiarella v. United States (1979), the U.S. Supreme Court overturned a conviction for securities fraud under Section 10(b) of the Securities Exchange Act and Rule 10b-5, ruling that a person who trades on non-public material information is not guilty of insider trading unless they have a fiduciary duty to shareholders. Vincent Chiarella, an employee at Pandick Press, was convicted after he used undisclosed takeover bids to make profitable stock purchases. However, since he had no direct relationship with the sellers or buyers of the stocks in question and did not owe them any legal obligation as per his employment status, it was ruled that his actions did not constitute illegal insider trading.

In the dissenting opinion for Chiarella v. United States, Justice Blackmun argued that a person who trades on material non-public information is guilty of fraud under federal securities laws even if they don't have a fiduciary duty to shareholders. He believed that such trading was inherently deceptive and manipulative, regardless of whether or not there was an established relationship between the trader and those affected by their actions. In his view, anyone with access to confidential information should be required to either disclose this knowledge before trading or abstain from trading altogether in order to maintain fairness in the market. This interpretation would extend beyond traditional insiders like company officers and directors, covering any individual who gains significant nonpublic details about a firm's situation.