MR. JUSTICE BRENNAN delivered the opinion of the Court.
The question presented in this case is whether § 17 (a) (1) of the Securities Act of 1933, 48 Stat. 84, as amended, 68 Stat. 686, 15 U. S. C. § 77q (a) (1), prohibits frauds against brokers as well as investors. We hold that it does.
Respondent, Neil Naftalin, was the president of a registered broker-dealer firm and a professional investor. Between July and August 1969, Naftalin engaged in a "short selling" scheme. He selected stocks that, in his judgment, had peaked in price and were entering into a period of market decline. He then placed with five brokers orders to sell shares of these stocks, although he did not own the shares he purported to sell. Gambling that the price of the securities would decline substantially before he was required to deliver them, respondent planned to make offsetting purchases through other brokers at lower prices. He intended to take as profit the difference between the price at which he sold and the price at which he covered. Respondent was aware, however, that had the brokers who executed his sell orders known that he did not own the securities, they either would not have accepted the orders, or would have required a margin deposit. He therefore falsely represented that he owned the shares he directed them to sell.
Unfortunately for respondent, the market prices of the securities he "sold" did not fall prior to the delivery date, but instead rose sharply. He was unable to make covering purchase,
The United States District Court for the District of Minnesota found respondent guilty on eight counts of employing "a scheme and artifice to defraud" in the sale of securities, in violation of § 17 (a) (1).
Section 17 (a) of the Securities Act of 1933, subsection (1) of which respondent was found to have violated, states:
In this Court, Naftalin does not dispute that, by falsely representing that he owned the stock he sold, he defrauded the brokers who executed his sales. Brief for Respondent 7-8, 11; Tr. of Oral Arg. 17-18. He contends, however, that the Court of Appeals correctly held that § 17 (a) (1) applies solely to frauds directed against investors, and not to those against brokers.
Nothing on the face of the statute supports this reading of it. Subsection (1) makes it unlawful for "any person in the offer or sale of any securities . . . directly or indirectly . . . to employ any device, scheme, or artifice to defraud . . . ." (Emphasis added.) The statutory language does not require that the victim of the fraud be an investor—only that the fraud occur "in" an offer or sale.
An offer and sale clearly occurred here. Respondent placed sell orders with the brokers; the brokers, acting as agents, executed the orders; and the results were contracts of sale, which are within the statutory definition, 15 U. S. C. § 77b (3).
This language does not require that the fraud occur in any particular phase of the selling transaction. At the very least, an order to a broker to sell securities is certainly an "attempt to dispose" of them.
Thus, nothing in subsection (1) of § 17 (a) creates a requirement that injury occur to a purchaser. Respondent nonetheless urges that the phrase, "upon the purchaser," found only in subsection (3) of § 17 (a), should be read into all three subsections. The short answer is that Congress did not write the statute that way. Indeed, the fact that it did not provides strong affirmative evidence that while impact upon a purchaser may be relevant to prosecutions brought
The court below placed primary reliance for its restrictive interpretation of § 17 (a) (1) upon what it perceived to be Congress' purpose in passing the Securities Act. Noting that both this Court and Congress have emphasized the importance of the statute in protecting investors from fraudulent practices in the sale of securities, see Ernst & Ernst v. Hochfelder, 425 U.S. 185, 195 (1976), the Court of Appeals concluded that "against this backdrop . . . we are constrained to hold that
But neither this Court nor Congress has ever suggested that investor protection was the sole purpose of the Securities Act. As we have noted heretofore, the Act "emerged as part of the aftermath of the market crash in 1929." Ernst & Ernst v. Hochfelder, supra, at 194. See generally 1 Loss 120-121. Indeed, Congress' primary contemplation was that regulation of the securities markets might help set the economy on the road to recovery. See 77 Cong. Rec. 2925 (1933) (remarks of Rep. Kelly); id., at 2935 (remarks of Rep. Chapman); id., at 3232 (remarks of Sen. Norbeck); H. R. Rep. No. 85, 73d Cong., 1st Sess., 2 (1933). Prevention of frauds against investors was surely a key part of that program, but so was the effort "to achieve a high standard of business ethics . . . in every facet of the securities industry." SEC v. Capital Gains Bureau, 375 U.S. 180, 186-187 (1963) (emphasis added). See Ernst & Ernst v. Hochfelder, supra, at 195; United States v. Brown, 555 F.2d 336, 338-339 (CA2 1977).
This conclusion is amply supported by reference to the legislative record. The breadth of Congress' purpose is most clearly demonstrated by the Senate Report:
While investor protection was a constant preoccupation of the legislators, the record is also replete with references to the desire to protect ethical businessmen. See 77 Cong. Rec. 2925 (1933) (remarks of Rep. Kelly); id., at 2983 (remarks of Sen. Fletcher); id., at 3232 (remarks of Sen. Norbeck); S. Rep. No. 47, 73d Cong., 1st Ses., 1 (1933). As Representative Chapman stated, "[t]his legislation is designed to protect not only the investing public but at the same time to protect honest corporate business." 77 Cong. Rec. 2935 (1933). Respondent's assertion that Congress' concern was limited to investors is thus manifestly inconsistent with the legislative history.
Moreover, the welfare of investors and financial intermediaries are inextricably linked—frauds perpetrated upon either business or investors can redound to the detriment of the other and to the economy as a whole. See generally Securities and Exchange Commission, Report of the Special Study of the Securities Markets, H. R. Doc. No. 95, 88th Cong., 1st Sess., pt. 1, pp. 9-11 (1963). Fraudulent short sales are no exception.
Although the question was not directly presented in the Government's petition for certiorari, respondent asserts a final, independent argument in support of the judgment below. That assertion is that the Securities Act of 1933 was "preoccupied with" the regulation of initial public offerings of securities, and that Congress waited until the Securities Exchange Act of 1934 to regulate abuses in the trading of securities in the "aftermarket." As Naftalin's fraud did not involve a new offering, he contends that § 17 (a) is inapplicable, and that he should have been prosecuted for violations of either the specific short-selling regulations promulgated under the 1934 Act,
Although it is true that the 1933 Act was primarily concerned
Accord, H. R. Rep. No. 85, 73d Cong., 1st Sess., 6 (1933). Respondent is undoubtedly correct that the two Acts prohibit some of the same conduct. See 3 Loss 1428. But "[t]he fact that there may well be some overlap is neither unusual nor unfortunate." SEC v. National Securities, Inc., 393 U. S., at 468. See Edwards v. United States, 312 U.S. 473, 484 (1941). It certainly does not absolve Naftalin of guilt for the transactions which violated the statute under which he was convicted.
This is a criminal case, and we have long held that " `ambiguity concerning the ambit of criminal statutes should be resolved in favor of lenity,' " United States v. Culbert, 435 U.S. 371, 379 (1978), quoting Rewis v. United States, 401 U.S. 808,
MR. JUSTICE POWELL took no part in the consideration or decision of this case.