source: Caselaw Access Project

author: Mr. Justice Blackmun Mr. Justice White, Mr. Justice Stewart,

license: Public Domain

text:
    BARRETT v. UNITED STATES
    No. 74-5566.
    Argued November 4, 1975
    Decided January 13, 1976
    Blackmun, J., delivered the opinion of the Court, in which BüRger, C. J., and Brennan, White, Marshall, and Powell, JJ., joined. White, J., filed a concurring opinion, post, p. 225. Stewart, J., filed a dissenting opinion, in which Rehnquist, J., joined, post, p. 228. Stevens, J., took no part in the consideration or decision of the case.

      Thomas A. Schaffer, by appointment of the Court, 421 U. S. 908, argued the cause and filed a brief for petitioner.

      Robert B. Reich argued the cause for the United States pro hac vice. With him on the brief were Solicitor General Bork, Acting Assistant Attorney General Keeney, and Sidney M. Glazer.

   Mr. Justice Blackmun

delivered the opinion of the Court.

Petitioner Pearl Barrett has been convicted by a jury in the United States District Court for the Eastern District of Kentucky of a violation of 18 U. S. C. § 922 (h), a part of the Gun Control Act of 1968, Pub. L. 90-618, 82 Stat. 1213, amending the Omnibus Crime Control and Safe Streets Act of 1968, Pub. L. 90-351, 82 Stat. 197, enacted earlier the same year. The issue before us is whether § 922 (h) has application to a purchaser’s intrastate acquisition of a firearm that previously, but independently of the purchaser’s receipt, had been transported in interstate commerce from the manufacturer to a distributor and then from the distributor to the dealer.

I

In January 1967, petitioner was convicted in a Kentucky state court of housebreaking. He received a two-year sentence. On April 1, 1972, he purchased a .32-caliber Smith & Wesson revolver over the counter from a Western Auto Store in Booneville, Ky., where petitioner resided. The vendor, who was a local dentist as well as the owner of the store, and who was acquainted with petitioner, was a federally licensed firearms dealer. The weapon petitioner purchased had been manufactured in Massachusetts, shipped by the manufacturer to a distributor in North Carolina, and then received by the Kentucky dealer from the distributor in March 1972, a little less than a month prior to petitioner’s purchase. The sale to Barrett was the firearm’s first retail transaction. It was the only handgun then in the dealer’s stock. Tr. 36-47.

Within an hour after the purchase petitioner was arrested by a county sheriff for driving while intoxicated. The firearm, fully loaded, was on the floorboard of the car on the driver’s side.

Petitioner was charged with a violation of § 922 (h). He pleaded not guilty. At the trial no evidence was presented to show that Barrett personally had participated in any way in the previous interstate movement of the firearm. The evidence was merely to the effect that he had purchased the revolver out of the local dealer’s stock, and that the gun, having been manufactured and then warehoused in other States, had reached the dealer through interstate channels. At the close of the prosecution’s case, Barrett moved for a directed verdict of acquittal on the ground that § 922 (h) was not applicable to his receipt of the firearm. The motion was denied. The court instructed the jury that the statute’s interstate requirement was satisfied if the firearm at some time in its past had traveled in interstate commerce. A verdict of guilty was returned. Petitioner received a sentence of three years, subject to the immediate parole eligibility provisions of 18 U. S. C. §4208 (a)(2).

On appeal, the Court of Appeals affirmed by a divided vote on the question before us. 504 F. 2d 629 (CA6 1974). Because of the importance of the issue and because the Sixth Circuit’s decision appeared to have overtones of conflict with the opinion and decision of the United States Court of Appeals for the Eighth Circuit in United States v. Ruffin, 490 F. 2d 557 (1974), we granted certiorari limited to the § 922 (h) issue. 420 U. S. 923 (1975).

II

Petitioner concedes that Congress, under the Commerce Clause of the Constitution, has the power to regulate interstate trafficking in firearms. Brief for Petitioner 7. He states, however, that the issue before us concerns the scope of Congress’ exercise of that power in this statute. He argues that, in its enactment of § 922 (h), Congress was interested in “the business of gun traffic,” Brief for Petitioner 11; that the Act was meant “to deal with businesses, not individuals per se” (emphasis in original), id., at 14, that is, with mail-order houses, out-of-state sources, and the like; and that the Act was not intended to, and does not, reach an isolated intrastate receipt, such as Barrett’s transaction, where the handgun was sold within Kentucky by a local merchant to a local resident with whom the merchant was acquainted, and where the transaction “has no apparent connection with interstate commerce,” despite the weapon’s manufacture and original distribution in States other than Kentucky. Id., at 6.

We feel, however, that the language of § 922 (h), the structure of the Act of which § 922 (h) is a part, and the manifest purpose of Congress are all adverse to petitioner’s position.

A. Section 922 (h) pointedly and simply provides that it is unlawful for four categories of persons, including a convicted felon, “to receive any firearm or ammunition which has been shipped or transported in interstate or foreign commerce.” The quoted language is without ambiguity. It is directed unrestrictedly at the felon’s receipt of any firearm that “has been” shipped in interstate commerce. It contains no limitation to a receipt which itself is part of the interstate movement. We therefore have no reason to differ with the Court of Appeals’ majority’s conclusion that the language “means exactly what it says.” 504 F. 2d, at 632.

It is to be noted, furthermore, that while the proscribed act, “to receive any firearm,” is in the present tense, the interstate commerce reference is in the present perfect tense, denoting an act that has- been completed. Thus, there is no warping or stretching of language when the statute is applied to a firearm that already has completed its interstate journey and has come to rest in the dealer’s showcase at the time of its purchase and receipt by the felon. Congress knew the significance and meaning of the language it employed. It used the present perfect tense elsewhere in the same section, namely, in § 922 (h)(1) (a person who “has been convicted”), and in § 922 (h) (4) (a person who “has been adjudicated” or who “has been committed”), in contrast to its use of the present tense (“who is”) in §§922 (h)(1), (2), and (3). The statute’s pattern is consistent and no unintended misuse of language or of tense is apparent.

Had Congress intended to confine § 922 (h) to direct interstate receipt, it would have so provided, just as it did in other sections of the Gun Control Act. See § 922 (a) (3) (declaring it unlawful for a nonlicensee to receive in the State where he resides a firearm purchased or obtained “by such person outside that State”); § 922 (j) (prohibiting the receipt of a stolen firearm “moving as . . . interstate . . . commerce”); and § 922 (k) (prohibiting the receipt “in interstate . . . commerce” of a firearm the serial number of which has been removed). Statutes other than the Gun Control Act similarly utilize restrictive language when only direct interstate commerce is to be reached. See, e. g., 18 U. S. C. §§ 659, 1084, 1201, 1231, 1951, 1952, 2313, 2315, and 2421, and 15 U. S. C. § 77e. As we have said, there is no ambiguity in the words of § 922 (h), and there is no justification for indulging in uneasy statutory construction. United States v. Wiltberger, 5 Wheat. 76, 95-96 (1820); Yates v. United States, 354 U. S. 298, 305 (1957); Huddleston v. United States, 415 U. S. 814, 831 (1974). See United States v. Sullivan, 332 U. S. 689, 696 (1948). There is no occasion here to resort to a rule of lenity, see Rewis v. United States, 401 U. S. 808, 812 (1971); United States v. Bass, 404 U. S. 336, 347 (1971), for there is no ambiguity that calls for a resolution in favor of lenity. A criminal statute, to be sure, is to be strictly construed, but it is “not to be construed so strictly as to defeat the obvious intention of the legislature.” Ameri-can Fur Co. v. United States, 2 Pet. 358, 367 (1829); Huddleston v. United States, 415 U. S., at 831.

B. The very structure of the Gun Control Act demonstrates that Congress did not intend merely to restrict interstate sales but sought broadly to keep firearms away from the persons Congress classified as potentially irresponsible and dangerous. These persons are comprehensively barred by the Act from acquiring firearms by any means. Thus, § 922 (d) prohibits a licensee from knowingly selling or otherwise disposing of any firearm (whether in an interstate or intrastate transaction, see Huddleston v. United States, 415 U. S., at 833) to the same categories of potentially irresponsible persons. If § 922 (h) were to be construed as petitioner suggests, it would not complement § 922 (d), and a gap in the statute’s coverage would be created, for then, although the licensee is prohibited from selling either interstate or intrastate to the designated person, the vendee is not prohibited from receiving unless the transaction is itself interstate.

Similarly, § 922 (g) prohibits the same categories of potentially irresponsible persons from shipping or transporting any firearm in interstate commerce or, see 18 U. S. C. § 2 (b), causing it to be shipped interstate. Petitioner’s proposed narrow construction of § 922 (h) would reduce that section to a near redundancy with § 922 (g), since almost every interstate shipment is likely to have been solicited or otherwise caused by the direct recipient. That proposed narrow construction would also create another anomaly: if a prohibited person seeks to buy from his local dealer a firearm that is not currently in the dealer’s stock, and the dealer then orders it interstate, that person violates § 922 (h), but under the suggested construction, he would not violate § 922 (h) if the firearm were already on the dealer’s shelf.

We note, too, that other sections of the Act clearly apply to and regulate intrastate sales of a gun that has moved in intrastate commerce. For example, the licensing provisions, §§ 922 (a)(1) and 923 (a), apply to exclusively intrastate, as well as interstate, activity. Under § 922 (d), as noted above, a licensee may not knowingly sell a firearm to any prohibited person, even if the sale is intrastate. Huddleston v. United States, 415 U. S., at 833. Sections 922 (c) and (a)(6), relating, respectively, to a physical presence at the place of purchase and to the giving of false information, apply to intrastate as well as to interstate transactions. So, too, do §§ 922 (b) (2) and (5).

Construing § 922 (h) as applicable to an intrastate retail sale that has been preceded by movement of the firearm in interstate commerce is thus consistent with the entire pattern of the Act. To confine § 922 (h) to direct interstate receipts would result in having the Gun Control Act cover every aspect of intrastate transactions in firearms except receipt. This, however, and obviously, is the most crucial of all. Congress surely did not intend to except from the direct prohibitions of the statute the very act it went to such pains to prevent indirectly, through complex provisions, in the other sections of the Act.

C. The legislative history is fully supportive of our construction of § 922 (h). The Gun Control Act of 1968 was an amended and, for present purposes, a substantially identical version of Title IV of the Omnibus Crime Control and Safe Streets Act of 1968. Each of the statutes enlarged and extended the Federal Firearms Act, 52 Stat. 1250 (1938). Section 922 (h), although identical in its operative phrase with § 2 (f) of the Federal Firearms Act, expanded the categories of persons prohibited from receiving firearms. The new Act also added many prophylactic provisions, hereinabove referred to, governing intrastate as well as interstate transactions. See Zimring, Firearms and Federal Law: The Gun Control Act of 1968, 4 J. Legal Studies 133 (1975). But the 1938 Act, it was said, was designed “to prevent the crook and gangster, racketeer and fugitive from justice from being able to purchase or in any way come in contact with firearms of any kind.” S. Rep. No. 1189, 75th Cong., 1st Sess., 33 (1937). Nothing we have found in the committee reports or hearings on the 1938 legislation indicates any intention on the part of Congress to confine § 2 (f) to direct interstate receipt of firearms.

The history of the 1968 Act reflects a similar concern with keeping firearms out of the hands of categories of potentially irresponsible persons, including convicted felons. Its broadly stated principal purpose was “to make it possible to keep firearms out of the hands of those not legally entitled to possess them because of age, criminal background, or incompetency.” S. Rep. No. 1501, 90th Cong., 2d Sess., 22 (1968). See also 114 Cong. Rec. 13219 (1968) (remarks by Sen. Tydings); Huddleston v. United States, 415 U. S., at 824-825. Congressman Celler, the House Manager, expressed the same concern: “This bill seeks to maximize the possibility of keeping firearms out of the hands of such persons.” 114 Cong. Rec. 21784 (1968); Huddleston v. United States, 415 U. S., at 828. In the light of this principal purpose, Congress could not have intended that the broad and unambiguous language of § 922 (h) was to be confined, as petitioner suggests, to direct interstate receipts. That suggestion would remove from the statute the most usual transaction, namely, the felon’s purchase or receipt from his local dealer.

Ill

Two statements of this Court in past cases, naturally relied upon by petitioner, deserve mention. The first is an observation made over 30 years ago in reference to the 1938 Act’s § 2 (f), the predecessor of § 922 (h):

“Both courts below held that the offense created by the Act is confined to the receipt of firearms or ammunition as a part of interstate transportation and does not extend to the receipt, in an intrastate transaction, of such articles which, at some prior time, have been transported interstate. The Government agrees that this construction is correct.” Tot v. United States, 319 U. S. 463, 466 (1943).

In that case, the Court held that the presumption contained in § 2 (f), to the effect that “the possession of a firearm or ammunition by any such person [one convicted of a crime of violence or a fugitive from justice] shall be presumptive evidence that such firearm or ammunition was shipped or transported or received, as the case may be, by such person in violation of this Act,” was violative of due process.

The quoted observation, of course, is merely a recital as to what the District Court and the Court of Appeals in that case had held and a further statement that the Government had agreed that the construction by the lower courts was correct. Having made this observation, the Court then understandably moved on to the only issue in Tot, namely, the validity of the statutory presumption. The fact that the Government long ago took a narrow position on the reach of the 1938 Act may not serve to help its posture here, when it seemingly argues to the contrary, but it does not prevent the Government from arguing that the current gun control statute is broadly based and reaches a purchase such as that made by Barrett.

The second statement is more recent and appears in United States v. Bass, supra. The Bass comment, of course, is dictum, for Bass had to do with a prosecution under 18 U. S. C. App. § 1202 (a), a provision which was part of Title VII, not of Title IV, of the Omnibus Crime Control and Safe Streets Act of 1968, as amended. Section 1202 (a) concerned any member of stated categories of persons “who receives, possesses, or transports in commerce or affecting commerce . . . any firearm.” The Government contended that the statute did not require proof of a connection with interstate commerce. The Court held, however, that the statute was ambiguous and that, therefore, it must be read to require such a nexus. In so holding, the Court noted the connection between Title VII and Title IV, and observed that although subsections of the two Titles addressed their prohibitions to some of the same people, each also reached groups not reached by the other. Then followed the dictum in question. The Court went on to state:

“While the reach of Title IV itself is a question to be decided finally some other day, the Government has presented here no learning or other evidence indicating that the 1968 Act changed the prior approach to the 'receipt’ offense.” 404 U. S., at 343 n. 10.

The Bass dictum was just another observation made in passing as the Court proceeded to consider § 1202 (a). The observation went so far as to intimate that Title IV was to be limited even with respect to a transaction possessing an interstate commerce nexus, a situation that Barrett here concedes is covered by §922 (h). In any event, the Court, by its statement in n. 10 of the Bass opinion, reserved the question of the reach of Title IV for “some other day.” That day is now at hand, with Barrett’s case before us. And it is at hand with the benefit of full briefing and an awareness of the plain language of § 922 (h), of the statute’s position in the structure of the entire Act, and of the legislative aims and purpose.

Furthermore, we are not willing to decide the present case on the assumption that Congress, in passing the Gun Control Act 25 years after Tot was decided, had the Court’s casual recital in Tot in mind when it used language identical to that in the 1938 Act. There is one mention of Tot in the debates, 114 Cong. Rec. 21807 (1968), and one mention in the reports, S. Rep. No. 1097, 90th Cong., 2d Sess., 272 (1968) (additional views of Sens. Dirksen, Hruska, Thurmond, and Burdick). These reflect a concern with the fact that Tot eliminated the presumption of interstate movement, thus increasing the burden of proof on the Government. They do not focus on what showing was necessary to carry that burden of proof. Similarly, the few references to Tot in the hearings reflect objections to the elimination of the presumption, but mention only in passing the type of proof that the witness believed was necessary to satisfy § 2 (f). See, e. g., Hearings on S. 1, Amendment 90 to S. 1, S. 1853, and S. 1854 before Subcommittee to Investigate Juvenile Delinquency of the Senate Committee on the Judiciary, 90th Cong., 1st Sess., 46 (1967); Hearings on H. R. 5037, H. R. 5038, H. R. 5384, H. R. 5385, and H. R. 5386 before Subcommittee No. 5 of the House Committee on the Judiciary, 90th Cong., 1st Sess., 561-562, 564, 677-678. Nothing in this legislative history persuades us that Congress intended to adopt Tot’s limited interpretation. If we were to conclude otherwise, we would fly in the face of, and ignore, obvious congressional intent at the price of a passing recital. See Girouard v. United States, 328 U. S. 61, 69-70 (1946). To hold, as the Court did in Bass, 404 U. S., at 350, that Title VII, directed to a receipt of any firearm “in commerce or affecting commerce,” requires only a showing that the firearm received previously traveled in interstate commerce, but that Title IY, relating to a receipt of any firearm “which has been shipped or transported in interstate . . . commerce,” is limited to the receipt of the firearm as part of an interstate movement, would be inconsistent construction of sections of the same Act and, indeed, would be downgrading the stronger language and upgrading the weaker.

We conclude that § 922 (h) covers the intrastate receipt, such as petitioner’s purchase here, of a firearm that previously had moved in interstate commerce. The judgment of the Court of Appeals, accordingly, is affirmed.

7 It %s so ordered.

Mr. Justice Stevens took no part in the consideration or decision of this case.

Mr. Justice White,

concurring.

In meeting petitioner’s contention that Tot v. United States, 319 U. S. 463 (1943), necessarily confines the offense created by 18 U. S. C. § 922 (h) to the receipt of a firearm in the course of an interstate shipment, the Court reads the Tot opinion as reciting but not adopting the lower courts’ holdings that § 2 (f) of the Federal Firearms Act of 1938 did not cover the intrastate receipt of a firearm that previously had moved in interstate commerce. Ante, at 221-222. I join the Court in this respect. Also, I find its construction of § 922 (h) to be correct even if it is assumed, as Mr. Justice Stewart concludes, post, at 228-230, and n. 3, that the Tot decision did adopt the more limited construction of § 2 (f).

Section 2 (f) of the Federal Firearms Act of 1938, 52 Stat. 1251, at issue in Tot, read as follows:

“It shall be unlawful for any person who has been convicte'd of a crime of violence or is a fug[i]tive from justice to receive any firearm or ammunition which has been shipped or transported in interstate or foreign commerce, and the possession of a firearm or ammunition by any such person shall be presumptive evidence that such firearm or ammunition was shipped or transported or received, as the case may be, by such person in violation of this Act.”

The opening words of the section broadly describing the statutory violation as receiving a firearm which “has been shipped or transported” in interstate commerce were immediately followed by a provision that it could be presumed from possession alone that the defendant-possessor had personally participated in the interstate movement of the possessed firearm. Had Congress intended to proscribe the mere intrastate receipt by a defendant of a gun which had previously moved in interstate commerce without any involvement by the defendant in that movement, there would have been little or no reason to provide that his personal participation in the interstate movement could be inferred from his possession alone. Proof of personal possession and previous interstate movement independent of any act of the defendant, which would be sufficient to make out intrastate receipt of a firearm which had previously moved in interstate commerce, requires no such presumptive assistance.

In this light it is not surprising that the otherwise broad language of the statute, which was not limited-to receipts that were themselves part of the interstate movement, was nonetheless understood to reach only receipts directly involved in interstate commerce. Tot v. United States, supra, it is argued, so understood the statute. Striking down the presumption did not remove this gloss from the language defining the violation. Thus after Tot, and as long as Congress left § 2 (f) intact, to establish a violation of § 2 (f) it was necessary to prove that a convicted felon found in possession of a firearm actually participated in an interstate shipment.

When § 922 (h) was enacted, however, Congress omitted the presumptive language of the prior statute and removed any basis for reading the plain language of the statute to reach only receipts of firearms which have moved in interstate commerce with the aid or participation of the defendant. That the plain language of § 922 (h) contains no limitation to receipts which are themselves part of an interstate movement is not disputed. Instead the argument is that by reenacting the initial language of § 2 (f) Congress intended to maintain the restricted meaning even though it dropped the presumption which had provided the gloss and added nothing in its stead.

It is noted that Congress was aware that after Tot, “in order to establish a violation of this statute, it is necessary to prove that a convicted felon found in possession of a firearm actually received it in the course of an interstate shipment.” From this it is inferred that in enacting § 922 (h) Congress adopted Tot’s interpretation of the glossed language of §2(f). But the quoted statement simply describes the continuing effect of the gloss provided by the language of the invalidated presumption in § 2 (f). Congressional awareness of the effect of Tot does not overcome the concededly plain language of § 922 (h) or the force of the Court’s analysis of the statutory scheme of which it is a part. Ante, afc 216-219. Indeed I find that congressional understanding of the history of § 2 (f), first with and then without its presumption, supports the Court’s determination that § 922 (h) “covers the intrastate receipt ... of a firearm that previously had moved in interstate commerce.” Ante, at 225.

Mr. Justice Stewart,

with whom Mr. Justice Rehnquist joins, dissenting.

The petitioner in this case, a former convict, was arrested for driving while intoxicated. A revolver, fully loaded, was found on the floorboard of his car. These circumstances are offensive to those who believe in law and order. They are particularly offensive to those concerned with the need to control handguns. While I understand these concerns, I cannot join the Court in its rush to judgment, because I believe that as a matter of law the petitioner was simply not guilty of the federal statutory offense of which he stands convicted.

The petitioner bought a revolver from the Western Auto Store in Booneville, Ky., in an over-the-counter retail sale. Within an hour, he was arrested for driving while intoxicated and the revolver was found on the floorboard of his car. The revolver had been manufactured in Massachusetts and shipped to the Booneville retailer from a North Carolina distributor. The prosecution submitted no evidence of any kind that the petitioner had participated in any interstate activity involving the revolver, either before or after its purchase. On these facts, he was convicted of violating 18 U. S. C. § 922 (h), which makes it unlawful for a former criminal offender like the petitioner, “to receive any firearm or ammunition which has been shipped or transported in interstate or foreign commerce.”

This clause first appeared in the predecessor of § 922 (h), § 2 (f) of the Federal Firearms Act of 1938, 52 Stat. 1250, 1251. In Tot v. United States, 319 U. S. 463 (1943), the Court interpreted this statutory-language to prohibit only receipt of firearms or ammunition as part of an interstate transaction:

“Both courts below held that the offense created by the Act is confined to the receipt of firearms or ammunition as a part of interstate transportation and does not extend to the receipt, in an intrastate transaction, of such articles which, at some prior time, have been transported interstate. The Government agrees that this construction is correct.” Id., at 466.

Although the Tot Court was principally concerned with the constitutionality of the presumption established by the last clause of § 2 (f), its interpretation of the first clause of the statute was essential to its holding. The statutory presumption was that possession of a firearm or ammunition by any person in the class specified in § 2 (f) established receipt in violation of the statute. The Court in Tot held the presumption unconstitutional for lack of a rational connection between the fact proved and the facts presumed. 319 U. S., at 467-468. The Court could not have reached that decision without first determining what set of facts needed to exist in order to constitute a violation of the statute.

The Tot case did not go unnoticed when 18 TJ. S. C. § 922 (h) was enacted in its present form in 1968, as the legislative history clearly reveals. Subcommittees of both the Senate and House Judiciary Committees in 1967 conducted hearings on bills to amend the Federal Firearms Act. At both hearings, the Commissioner of Internal Revenue explained the decision in Tot:

“The Supreme Court declared [the presumption in § 2 (f) ] unconstitutional in a 1943 case, Tot v. United States, 319 U. S. 463. Consequently, in order to establish a violation of this statute, it is necessary to prove that a convicted felon found in possession of a firearm actually received it in the course of an interstate shipment.” Hearings on S. 1, Amendment 90 to S. 1, S. 1853, and S. 1854 before Subcommittee to Investigate Juvenile Delinquency of the Senate Committee on the Judiciary, 90th Cong., 1st Sess., 46 (1967).
“The Supreme Court has declared [the presumption in § 2 (f)] unconstitutional. In order to establish the violation of the statute it is necessary to find that the felon found in possession of the firearm actually received it in the course of interstate commerce or transportation.” Hearings on H. R. 5037, H. R. 5038, H. R. 5384, H. R. 5385, and H. R. 5386 before Subcommittee No. 5 of the House Committee on the Judiciary, 90th Cong., 1st Sess., 561 (1967).

In both hearings, the Commissioner was speaking in support of bills that omitted the presumption held unconstitutional in Tot, but that otherwise retained the same language there construed. See Hearings on S. 1, Amendment 90 to S. 1, S. 1853, and S. 1854, supra, at 16, 43-44; Hearings on H. R. 5037, H. R. 5038, H. R. 5384, H. R. 5385, and H. R. 5386, supra, at 13, 555. That is precisely the form in which the statute now before us, § 922 (h), was enacted in 1968. It is thus evident that Congress was aware of Tot and adopted its interpretation of the statutory language in enacting the present law. See Francis v. Southern Pacific Co., 333 U. S. 445, 449-450 (1948); Apex Hosiery Co. v. Leader, 310 U. S. 469, 488-489 (1940); Commissioner v. Estate of Church, 335 U. S. 632, 682, 690 (1949) (Frankfurter, J., dissenting).

Just four years ago, in United States v. Bass, 404 U. S. 336 (1971), the Court expressly stated that it found nothing to indicate “that the 1968 Act changed the prior approach to the 'receipt’ offense.” Id., at 343 n. 10. I would adhere to the Court’s settled interpretation of the statutory language here involved and reverse the judgment of the Court of Appeals.

       “§ 922. Unlawful acts.
      “(h) It shall be unlawful for any person—
      “(1) who is under indictment for, or who has been convicted in any court of, a crime punishable by imprisonment for a term exceeding one year;
      “(2) who is a fugitive from justice;
      “(3) who is an unlawful user of or addicted to marihuana or any depressant or stimulant drug (as defined in section 201 (v) of the Federal Food, Drug, and Cosmetic Act) or narcotic drug (as defined in section 4731 (a) of the Internal Revenue Code of 1954) ; or
      “(4) who has been adjudicated as a mental defective or who has been committed to any mental institution;
      "to receive any firearm or ammunition which has been shipped or transported in interstate or foreign commerce.”

       Petitioner at the time of the purchase was not asked to complete Treasury Form 4473, designed for use in the enforcement of the gun control provisions of the statute. Tr. 45-47. Accordingly, there is no issue here as to the making of any false statement, in violation of § 922 (a) (6). See Huddleston v. United States, 415 U. S. 814 (1974).

       The defense also moved to quash the indictment on the ground that on June 20, 1969, the Governor of Kentucky, by executive order in the nature of a pardon, had granted petitioner “all the rights of citizenship denied him in consequence of said judgment of conviction.” It was suggested that this served to wipe out petitioner’s state felony conviction of January 1967. The motion to quash was denied. The same argument was made in the Court of Appeals, but that court unanimously rejected it for reasons stated in the court’s respective majority and dissenting opinions. 504 F. 2d 629, 632-634 (CA6 1974). The issue is not presented here.

       “Now, interstate commerce, ladies and gentlemen, is the movement of something of value from one political subdivision, which we call a state, to another political subdivision, which we call a state. Interstate commerce occurs when something of value crosses a state boundary line. Now, if you believe that from this evidence . . . the firearm in question was manufactured in a state other than Kentucky, then you are entitled to make the permissible inference that in order for that firearm to be physically located in Kentucky, ... it had to be engaged in interstate transportation at some point or another, but this is a permissible inference. You are not required to make that inference unless you believe from the evidence that that is a logical, reasonable determination to make from the facts.” Tr. 99-100.

       Section 2 (f) provided:
      “It shall be unlawful for any person who has been convicted of a crime of violence or is a fugutive [sic] from justice to receive any firearm or ammunition which has been shipped or transported in interstate or foreign commerce . . . 52 Stat. 1251.

       There is, of course, no rule of law to the effect that the Government must be consistent in its stance in litigation over the years. It has changed positions before. See, e. g., Automobile Club of Michigan v. Commissioner, 353 U. S. 180, 183 (1957).

       “Even under respondent’s view, a Title VII offense is made out if the firearm was possessed or received ‘in commerce or affecting commerce’; however, Title IV apparently does not reach possessions or intrastate transactions at all, even those with an interstate commerce nexus, but is limited to the sending or receiving of firearms as part of an interstate transportation.” 404 U. S., at 342-343.

       “The verdict of quiescent years cannot be invoked to baptize a statutory gloss that is otherwise impermissible. This Court has many times reconsidered statutory constructions that have been passively abided by Congress. Congressional inaction frequently betokens unawareness, preoccupation, or paralysis.” Zuber v. Allen, 396 U. S. 168, 185-186, n. 21 (1969).

      Hearings on S. 1, Amendment 90 to S. 1, S. 1853, and S. 1854 before Subcommittee to Investigate Juvenile Delinquency of the Senate Committee on the Judiciary, 90th Cong., 1st Sess., 46 (1967). See also Hearings on H.R. 5037, H. R. 5038, H. R. 5384, H. R. 5385, and H. R. 5386 before Subcommittee No. 5 of the House Committee on the Judiciary, 90th Cong., 1st Sess., 561 (1967).

       Section 2 (f) of the Federal Firearms Act provided:
      “It shall be unlawful for any person who has been convicted of a crime of violence or is a fug[i]tive from justice to receive any firearm or ammunition which has been shipped or transported in interstate or foreign commerce, and the possession of a firearm or ammunition by any such person shall be presumptive evidence that such firearm or ammunition was shipped or transported or received, as the case may be, by such person in violation of this Act.”

       See n. 1, supra.

       The Court today reads the Tot opinion as only attributing this interpretation to the courts below and to the Government, and not as adopting it. Ante, at 221-222. This reading is mistaken, for in rejecting an argument premised on the power of Congress to prohibit all possession of firearms by felons, the Tot opinion stated:
      “[I]t is plain that Congress, for whatever reason, did not seek to pronounce general prohibition of possession by certain residents of the various states of firearms in order to protect interstate commerce, but dealt only with their future acquisition in interstate commerce.” 319 U. S., at 472 (emphasis added).

       See also these Hearings, at 575 (statement of Commissioner of Internal Revenue), 629-630, 677-678 (statements of other witnesses).

       The cases relied upon by the Court, ante, at 223 n. 8 and 224, stand for the quite different proposition that where it cannot be shown that Congress was aware of a decision of this Court interpreting a statute, such awareness cannot be presumed: Zuber v. Allen, 396 U. S. 168, 185-186, n. 21 (1969); Girouard v. United States, 328 U. S. 61, 69-70 (1946).


author: Mr. Justice Powell

text:
    FOREMOST-McKESSON, INC. v. PROVIDENT SECURITIES CO.
    No. 74-742.
    Argued October 7, 1975
    Decided January 13, 1976

      Powell, J., delivered the opinion of the Court, in which Burger, C. J., and Brennan, Stewart, Marshall, Blackmun, and Rehnquist, JJ., joined, and in all but Part IV-C of which White, J., joined. Stevens, J., took no part in the consideration or decision of the ease.

      Morton Moskin argued the cause for petitioner. With him on the briefs were Thomas McGanney and Philip E. Diamond.

      Noble K. Gregory argued the cause for respondent. With him on the brief were John B. Bates and Walter R. Allan.

        S. Hazard Gillespie filed a brief for Allis-Chalmers Manufacturing Co. as amicus curiae urging reversal.

        Whitney North Seymour, John A. Guzzetta, Bernhardt K. Wruble, and Conrad K. Harper filed a brief for Gulf & Western Industries, Inc., as amicus curiae urging affirmance.

   Mr. Justice Powell

delivered the opinion of the Court.

This case presents an unresolved issue under § 16 (b) of the Securities Exchange Act of 1934 (Act), 48 Stat. 896, 15 U. S. C. § 78p (b). That section of the Act was designed to prevent a corporate director or officer or “the beneficial owner of more than 10 per centum” of a corporation from profiteering through short-swing securities transactions on the basis of inside information. It provides that a corporation may capture for itself the profits realized on a purchase and sale, or sale and purchase, of its securities within six months by a director, officer, or beneficial owner. Section 16 (b)’s last sentence, however, provides that it “shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved . . . .” The question presented here is whether a person purchasing securities that put his holdings above the 10% level is a beneficial owner “at the time of the purchase” so that he must account for profits realized on a sale of those securities within six months. The United States Court of Appeals for the Ninth Circuit answered this question in the negative. 506 F. 2d 601 (1974). We afiirm.

I

Respondent, Provident Securities Co., was a personal holding company. In 1968 Provident decided tentatively to liquidate and dissolve, and it engaged an agent to find a purchaser for its assets. Petitioner, Foremost-McKes-son, Inc., emerged as a potential purchaser, but extensive negotiations were required to resolve a disagreement over the nature of the consideration Foremost would pay. Provident wanted cash in order to facilitate its dissolution, while Foremost wanted to pay with its own securities.

Eventually a compromise was reached, and Provident and Foremost executed a purchase agreement embodying their deal on September 25, 1969. The agreement provided that Foremost would buy two-thirds of Provident’s assets for $4.25 million in cash and $49.75 million in Foremost convertible subordinated debentures. The agreement further provided that Foremost would register under the Securities Act of 1933 $25 million in principal amount of the debentures and would participate in an underwriting agreement by which those debentures would be sold to the public. At the closing on October 15, 1969, Foremost delivered to Provident the cash and a $40 million debenture which was subsequently exchanged for two debentures in the principal amounts of $25 million and $15 million. Foremost also delivered a $2.5 million debenture to an escrow agent on the closing date. On October 20 Foremost delivered to Provident a $7.25 million debenture representing the balance of the purchase price. These debentures were immediately convertible into more than 10% of Foremost’s outstanding common stock.

On October 21 Provident, Foremost, and a group of underwriters executed an underwriting agreement to be closed on October 28. The agreement provided for sale to the underwriters of the $25 million debenture. On October 24 Provident distributed the $15 million and $7.25 million debentures to its stockholders, reducing the amount of Foremost common into which the company’s holdings were convertible to less than 10%. On October 28 the closing under the underwriting agreement was accomplished. Provident thereafter distributed the cash proceeds of the debenture sale to its stockholders and dissolved.

Provident’s holdings in Foremost debentures as of October 20 were large enough to make it a beneficial owner of Foremost within the meaning of § 16. Having acquired and disposed of these securities within six months, Provident faced the prospect of a suit by Foremost to recover any profits realized on the sale of the debenture to the underwriters. Provident therefore sued for a declaration that it was not liable to Foremost under § 16 (b). The District Court granted summary judgment for Provident, and the Court of Appeals affirmed.

Provident’s principal argument below for nonliability was based on Kern County Land Co. v. Occidental Corp., 411 U. S. 582 (1973). There we held that an “unorthodox transaction” in securities that did not present the possibility of speculative abuse of inside information was not a “sale” within the meaning of § 16 (b). Provident contended that its reluctant acceptance of Foremost debentures in exchange for its assets was an “unorthodox transaction” not presenting the possibility of speculative abuse and therefore was not a “purchase” within the meaning of § 16 (b). Although the District Court’s pre-Kern County opinion had adopted this type of analysis, 331 F. Supp. 787 (ND Cal. 1971), the Court of Appeals rejected it, reasoning that Provident’s acquisition of the debentures was not “unorthodox” and that the circumstances did not preclude the possibility of speculative abuse. 506 F. 2d, at 604-605.

The Court of Appeals then considered two theories of nonliability based on § 16 (b)’s exemptive provision: “This subsection shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase . . . .” The first was Provident’s argument that it was not a beneficial owner “at the time of . . . sale.” After the October 24 distribution of some debentures to stockholders, the debentures held by Provident were convertible into less than 10% of Foremost’s outstanding common stock. Provident contended that its sale to the underwriters did not occur until the underwriting agreement was closed on October 28. If this were the case, the sale would not have been covered by § 16 (b), since Provident would not have been a beneficial owner “at the time of . . . sale.” The Court of Appeals rejected this argument because it found that the sale occurred on October 21 upon execution of the underwriting agreement.

The Court of Appeals then turned to the theory of nonliability based on the exemptive provision that we consider here. It held that in a purchase-sale sequence the phrase “at the time of the purchase,” “must be construed to mean prior to the time when the decision to purchase is made.” 506 F. 2d, at 614. Thus, although Provident became a beneficial owner of Foremost by acquiring the debentures, it was not a beneficial owner “at the time of the purchase.” Accordingly, the exemptive provision prevented any § 16 (b) liability on Provident’s part.

II

The meaning of the exemptive provision has been disputed since § 16 (b) was first enacted. The discussion has focused on the application of the provision to a purchase-sale sequence, the principal disagreement being whether “at the time of the purchase” means “before the purchase” or “immediately after the purchase.” The difference in construction is determinative of a beneficial owner’s liability in cases such as Provident’s where such owner sells within six months of purchase the securities the acquisition of which made him a beneficial owner. The commentators divided immediately over which construction Congress intended, and they remain divided. The Courts of Appeals also are in disagreement over the issue.

The question of what Congress intended to accomplish by the exemptive provision in a purchase-sale sequence came to a Court of Appeals for the first time in Stella v. Graham-Paige Motors Corp., 232 F. 2d 299 (CA2), cert. denied, 352 U. S. 831 (1956). There the Court of Appeals for the Second Circuit without discussion, but over a dissent, affirmed the District Court’s adoption of the “immediately after the purchase” construction. That court had been impelled to this construction at least in part by concern over what the phrase “at the time of . . . purchase” means in a sale-repurchase sequence, reasoning:

“If the [‘before the purchase’] construction urged by [Graham-Paige] is placed upon the exemption provision, it would be possible for a person to purchase a large block of stock, sell it out until his ownership was reduced to less than 10%, and then repeat the process, ad infinitum.” 104 F. Supp. 957, 959 (SDNY 1952).

The District Court may have thought that “before the purchase” seemed an unlikely construction of the exemptive provision in a sale-repurchase sequence, so it could not be the proper construction in a purchase-sale sequence. The Stella construction of the exemptive provision has been adhered to in the Second Circuit, Newmark v. RKO General, Inc., 425 F. 2d 348, 355-356, cert. denied, 400 U. S. 854 (1970); Perine v. William Norton & Co., 509 F. 2d 114, 118 (1974), and adopted by the Court of Appeals for the Eighth Circuit. Emerson Electric Co. v. Reliance Electric Co., 434 F. 2d 918, 923-924 (1970), aff'd on other grounds, 404 U. S. 418 (1972). But in none of the foregoing cases did the court examine critically the legislative history of § 16 (b).

The Court of Appeals considered this case against the background, sketched above, of ambiguity in the pertinent statutory language, continued disagreement among the commentators, and a perceived absence in the relatively few decided cases of a full consideration of the purpose and legislative history of § 16 (b). The court found unpersuasive the rationales offered in Stella and its progeny for the “immediately after the purchase” construction. It noted that construing the provision to require that beneficial-ownership status exist before the purchase in a purchase-sale sequence would not foreclose an “immediately after the purchase” construction in a sale-repurchase sequence. 506 F. 2d, at 614-615. More significantly, the Court of Appeals challenged directly the premise of the earlier cases that a “before the purchase” construction in a purchase-sale sequence would allow abuses Congress intended to abate. The court reasoned that in § 16 (b) Congress intended to reach only those beneficial owners who both bought and sold on the basis of inside information, which was presumptively available to them only after they became statutory “insiders.” 506 F. 2d at 608-614.

III

A

The general purpose of Congress in enacting § 16 (b) is well known. See Kern County Land Co., 411 U. S., at 591-592; Reliance Electric Co., 404 U. S., at 422, and the authorities cited therein. Congress recognized that insiders may have access to information about their corporations not available to the rest of the investing public. By trading on this information, these persons could reap profits at the expense of less well informed investors. In § 16 (b) Congress sought to “curb the evils of insider trading [by] . . . taking the profits out of a class of transactions in which the possibility of abuse was believed to be intolerably great.” Reliance Electric Co., supra, at 422. It accomplished this by defining directors, officers, and beneficial owners as those presumed to have access to inside information and enacting a flat rule that a corporation could recover the profits these insiders made on a pair of security transactions within six months.

Foremost points to this purpose, and invokes the observation in Reliance Electric Go. that “where alternative constructions of the terms of § 16 (b) are possible, those terms are to be given the construction that best serves the congressional purpose of curbing short-swing speculation by corporate insiders.” 404 U. S., at 424 (footnote omitted). From these premises Foremost argues that the Court of Appeals’ construction of the exemptive provision must be rejected because it makes § 16 (b) inapplicable to some possible abuses of inside information that the statute would reach under the Stella construction. We find this approach unsatisfactory in its focus on situations that § 16 (b) may not reach rather than on the language and purpose of the exemptive provision itself. Foremost’s approach also invites an imposition of § 16 (b)’s liability without fault that is not consistent with the premises upon which Congress enacted the section.

B

The exemptive provision, which applies only to beneficial owners and not to other statutory insiders, must have been included in § 16 (b) for a purpose. Although the extensive legislative history of the Act is bereft of any explicit explanation of Congress’ intent, see Reliance Electric Co., supra, at 424, the evolution of § 16 (b) from its initial proposal through passage does shed significant light on the purpose of the exemptive provision.

The original version of what would develop into the Act was S. 2693, 73d Cong., 2d Sess. (1934). It provided in § 15 (b):

“It shall be unlawful for any director, officer, or owner of securities, owning as of record and/or beneficially more than 5 per centum of any class of stock of any issuer, any security of which is registered on a national securities exchange—
“(1) To purchase any such registered security with the intention or expectation of selling the same security within six months; and any profit made by such person on any transaction in such a registered security extending over a period of less than six months shall inure to and be recoverable by the issuer, irrespective of any intention or expectation on his part in entering into such transaction of holding the security purchased for a period exceeding six months.”

In the next version of the legislation, H. It. 8720, 73d Cong., 2d Sess. (1934), § 15 (b) read almost identically to § 16 (b) as it was eventually enacted:

“Any profit realized by such beneficial owner, director, or officer from any purchase and sale or sale and purchase of any such registered equity security within a period of less than six months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the issuer, irrespective of any intention on the part of such beneficial owner, director, or officer in entering into such transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding six months.... This subsection shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale or sale and purchase of the security involved, nor any transaction or transactions which the Commission by rules and regulations may exempt as not comprehended within the purpose of this subsection of preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer.”

Thomas G. Corcoran, a spokesman for S. 2693’s drafters, explained § 15 (b) as forbidding an insider “to carry on any short-term specu[la]tions in the stock. He cannot, with his inside information get in and out of stock within six months.” Hearings on H. R. 7852 and H. R. 8720 before the House Committee on Interstate and Foreign Commerce, 73d Cong., 2d Sess., 133 (1934). The Court of Appeals concluded that § 15 (b) of S. 2693 would have applied only to a beneficial owner who had that status before a purchase-sale sequence was initiated, 506 F. 2d, at 609, and we agree. Foremost appears not to contest this point. Brief for Petitioner 29. The question thus becomes whether H. R. 8720's change in the language imposing liability and its addition of the exemp-tive provision were intended to change S. 2693's result in a purchase-sale sequence by a beneficial owner. We think the legislative history shows no such intent.

S. 2693 and its House counterpart, H. R. 7852, 73d Cong., 2d Sess. (1934), met substantial criticism on a number of scores, including various provisions of § 15. See Hearings on Stock Exchange Practices before the Senate Committee on Banking and Currency, 73d Cong., 2d Sess., pt. 15 (1934); Hearings on H. R. 7852 and H. R. 8720, supra, at 1-623. S. 2693 was recast into H. R. 8720 to take account of the criticisms that the bill’s drafters thought valid. Hearings on H. R. 7852 and H. R. 8720, supra, at 625, 674. The primary substantive criticism directed at § 15 (b) of S. 2693 was that it did not prevent the use of inside information to reap a short-term profit in a sale-repurchase situation. See Hearings on Stock Exchange Practices, supra, at 6557-6558. Criticism was also directed at making liability for short-term profits turn on ownership “as of record and/or beneficially.” See id., at 6914. H. R. 8720 remedied these perceived shortcomings by providing in § 15 (b): “Any profit realized by such beneficial owner, director, or officer from any purchase and sale or sale and purchase . . . shall inure to and be recoverable by the issuer.” The term “such beneficial owner” was defined in § 15 (a) to mean one “who is directly or indirectly the beneficial owner of more than 5 per centum of any class” of a registered security.

The structure of the clause imposing liability in the revised § 15 (b) did not unambiguously retain S. 2693’s requirement that beneficial ownership precede a purchase-sale sequence. But we cannot assume easily that Congress intended to eliminate the requirement in the revised bill. The legislative history reveals that the requirement was made clear in the hearings, yet no complaint was made about it.

The testimony on S. 2693 demonstrates that the drafters were emphatic about the requirement. In explaining the bill Corcoran pointed out a technical flaw in S. 2693’s language: “It shall be unlawful for any director, officer, or owner of securities, owning as of record and/or beneficially more than 5 per centum of any class of stock . . . .” It was possible to construe the phrase “owning ... 5 per centum” to apply to directors -and officers as well as to mere stockholders, so that trading by directors and officers would not be subject to § 15 (b) if their previous holdings did not exceed 5%. But Cor-coran made clear that the requirement of pre-existing ownership of the specified percentage applied only to beneficial owners.

“Mr. Corcoran. . . . The bill is not very well drawn there. It ought to-read to cover every director, every officer, and every stockholder who owns more than 5 percent of the stock. That is the way it was intended to read.
“Mr. Mapes. It ought to read 'and/or beneficially more than 5 percent’ followed by 'is a director, or officer.’
“Mr. Corcoran. It is badly drawn. We slipped on that. It ought to read 'every director and every officer’ and then ‘every big stockholder.’ ” Hearings on H. R. 7852 and H. R. 8720, supra, at 133.

See Hearings on Stock Exchange Practices, supra, at 6555.

The legislative record thus reveals that the drafters focused directly on the fact that S. 2693 covered a short-term purchase-sale sequence by a beneficial owner only if his status existed before the purchase, and no concern was expressed about the wisdom of this requirement. But the explicit requirement was omitted from the operative language of the section when it was restructured to cover sale-repurchase sequences. In the same draft, however, the exemptive provision was added to the section. On this record we are persuaded that the exemptive provision was intended to preserve the requirement of beneficial ownership before the purchase. Later discussions of the present § 16 (b) in the hearings are consistent with this interpretation. We hold that, in a purchase-sale sequence, a beneficial owner must account for profits only if he was a beneficial owner “before the purchase.”

IV

Additional considerations support our reading of the legislative history.

A

Section 16 (b) imposes a strict prophylactic rule with respect to insider, short-swing trading. In Kern County Land Co., 411 U. S., at 695, we noted:

“The statute requires the [statutorily defined] inside, short-swing trader to disgorge all profits realized on all ‘purchases’ and ‘sales’ within the specified time period, without proof of actual abuse of insider information, and without proof of intent to profit on the basis of such information.”

In short, this statute imposes liability without fault within its narrowly drawn limits.

As noted earlier, Foremost recognizes the ambiguity of the exemptive provision, but argues that where “alternative constructions” of § 16 (b)’s terms are available, we should choose the construction that best serves the statute’s purposes. Foremost relies on statements generally to this effect in Kern County Land Co., supra, at 595, and Reliance Electric Co., 404 U. S., at 424. In neither of those cases, however, did the Court adopt the construction that would have imposed liability, thus recognizing that serving the congressional purpose does not require resolving every ambiguity in favor of liability under § 16 (b). We reiterate that nothing suggests that the construction urged by Foremost would serve better to further congressional purposes. Indeed, the legislative history of § 16 (b) indicates that by adding the exemptive provision Congress deliberately expressed a contrary choice. But even if the legislative record were more ambiguous, we would hesitate to adopt Foremost’s construction. It is inappropriate to reach the harsh result of imposing § 16 (b)’s liability without fault on the basis of unclear language. If Congress wishes to impose such liability, we must assume it will do so expressly or by unmistakable inference.

It is not irrelevant that Congress itself limited carefully the liability imposed by § 16 (b). See Reliance Electric Co., supra, at 422-425. Even an insider may trade freely without incurring the statutory liability if, for example, he spaces his transactions at intervals greater than six months. When Congress has so recognized the need to limit carefully the “arbitrary and sweeping coverage” of § 16 (b), Bershad v. McDonough, 428 F. 2d 693, 696 (CA7 1970), cert. denied, 400 U. S. 992 (1971), courts should not be quick to determine that, despite an acknowledged ambiguity, Congress intended the section to cover a particular transaction.

B

Our construction of § 16 (b) also is supported by the distinction Congress recognized between short-term trading by mere stockholders and such trading by directors and officers. The legislative discourse revealed that Congress thought that all short-swing trading by directors and officers was vulnerable to abuse because of their intimate involvement in corporate affairs. But trading by mere stockholders was viewed as being subject to abuse only when the size of their holdings afforded the potential for access to corporate information.' These different perceptions simply reflect the realities of corporate life.

It would not be consistent with this perceived distinction to impose liability on the basis of a purchase made when the percentage of stock ownership requisite to insider status had not been acquired. To be sure, the possibility does exist that one who becomes a beneficial owner by a purchase will sell on the basis of information attained by virtue of his newly acquired holdings. But the purchase itself was not one posing dangers that Congress considered intolerable, since it was made when the purchaser owned no shares or less than the percentage deemed necessary to make one an insider. Such a stockholder is more analogous to the stockholder who never owns more than 10% and thereby is excluded entirely from the operation of § 16 (b), than to a director or officer whose every purchase and sale is covered by the statute. While this reasoning might not compel our construction of the exemptive provision, it explains why Congress may have seen fit to draw the line it did. Cf. Adler v. Klawans, 267 F. 2d 840, 845 (CA2 1959).

C

Section 16 (b)’s scope, of course, is not affected by whether alternative sanctions might inhibit the abuse of inside information. Congress, however, has left some problems of the abuse of inside information to other remedies. These sanctions alleviate concern that ordinary investors are unprotected against actual abuses of inside information in transactions not covered by § 16 (b). For example, Congress has passed general antifraud statutes that proscribe fraudulent practices by insiders. See Securities Act of 1933, § 17 (a), 48 Stat. 84, 15 U. S. C. § 77q (a); Securities Exchange Act of 1934, § 10 (b), 15 U. S. C. §78j(b); 3 Loss, supra, n. 11, at 1423-1429, 1442-1445. Today an investor who can show harm from the misuse of material inside information may have recourse, in particular, to § 10 (b) and Rule 10b-5, 17 CFR § 240.10b-5 (1975). It also was thought that § 16 (a)’s publicity requirement would afford indirect protection against some potential misuses of inside information. See Hearings on H. R. 7852 and H. R. 8720, supra, at 134-135; H. R. Rep. No. 1383, 73d Cong., 2d Sess., 13 (to accompany H. R. 9323, 73d Cong., 2d Sess., passed by the House, May 4, 1934, without the present § 16 (b)).

V

We must still consider briefly Foremost’s contention that the “before the purchase” construction renders other enactments of Congress unnecessary and conflicts with the interpretation of § 16 (b) by the Securities and Exchange Commission.

Foremost and amicus Allis-Chalmers Manufacturing Co. point to §§16 (d) and (e) of the Act, 15 U. S. C. §§ 78p (d) and (e), as congressional actions that would not have been necessary unless one selling the securities the acquisition of which made him a beneficial owner is liable under § 16 (b). Section 16 (d), in part, exempts from § 16 (b) certain transactions by a securities “dealer in the ordinary course of his business and incident to the establishment or maintenance by him of a primary or secondary market.” Section 16 (e) provides an exemption for certain “foreign or domestic arbitrage transactions.” They argue similarly that the SEC’s Rule 16b-2, 17 CFR § 240.16b-2 (1975), is unnecessary if our construction of § 16 (b) is correct. Rule 16b-2 exempts from § 16 (b) specified transactions “in connection with the distribution of a substantial block of securities.”

We do not consider these provisions to be inconsistent with our holding. Nothing on their faces would make them applicable to one selling the securities the purchase of which made him a beneficial owner. But the exemptions would be necessary to protect stockholders already qualifying as beneficial owners when they purchased and they would, of course, apply to transactions by directors and officers as well.

Foremost and the amicus also remind us that the interpretation of the exemptive provision for which they contend has been adopted by the SEC in the past. See Brief for SEC as Amicus Curiae in Reliance Electric Co. v. Emerson Electric Co., O. T. 1971, No. 70-79, pp. 22-27. But the Commission has not appeared as an amicus in this case. In any event, even if the Commission’s views have not changed we would not afford them the deference to which the views of the agency administering a statute are usually entitled, for in Reliance Electric Co., 404 U. S., at 425-427, the Court rejected the basic theory on which the SEC based its interpretation of the exemptive provision. Our re-examination of the exemptive provision confirms the view that the SEC’s theory did not reflect the intent of Congress.

The judgment is

Affirmed.

Mr. Justice White joins in the judgment of the Court, and in all but Part IY-C of the Court’s opinion.

Mr. Justice Stevens took no part in the consideration or decision of this case.

       The corporate “insiders” whose trading is regulated by § 16 (b) are defined in § 16 (a) of the Act, 15 U. S. C. § 78p (a), as “[e]very person who is directly or indirectly the beneficial owner of more than 10 per centum of any class of any equity security (other than an exempted security) which is registered pursuant to section 781 of this title, or who is a director or an officer of the issuer of such security.”

       Section 16(b), 15 U. S. C. §78p(b), reads in full:
      “For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such issuer (other than an exempted security) within any period of less than six months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the issuer, irrespective of any intention on the part of such beneficial owner, director, or officer in entering into such transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding six months. Suit to recover such profit may be instituted at law or in equity in any court of competent jurisdiction by the issuer, or by the owner of any security of the issuer in the name and in behalf of the issuer if the issuer shall fail or refuse to bring such suit within sixty days after request or shall fail diligently to prosecute the same thereafter; but no such suit shall be brought more than two years after the date such profit was realized. This subsection shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the Commission by rules and regulations may exempt as not comprehended within the purpose of this subsection.”

       The debentures wer.e issued expressly to acquire Provident’s assets, and all of them were used for that purpose.

         The underwriters delivered $25,366,666.66 in cash to Provident. That amount represented a purchase price of 101%% of the principal amount of the debenture ($25,312,500) plus interest accrued from October 15 to the date of closing ($54,166.66). The amount of profit realized by Provident has never been established.

       A beneficial owner is one who owns more than 10% of an “equity security” registered pursuant to § 12 of the Act, 15 U. S. C. § 781. See n. 1, supra. The owner of debentures convertible into more than 10% oí a corporation’s registered common stock is a beneficial owner within the meaning of the Act. §§ 3 (a) (10), (11) of the Act, 15 U. S. C. §§ 78c (a) (10), (11); Rule 16a-2 (b), 17 CFR § 240.16a-2 (b) (1975). Foremost’s common stock was registered; thus Provident’s holdings made it a beneficial owner.

       This contention was based on Reliance Electric Co. v. Emerson Electric Co., 404 U. S. 418 (1972). There the Court held that a sale made after a former beneficial owner had already reduced its holdings below 10% was exempted from § 16 (b) by the phrase “at the time of . . . sale” in the exemptive provision. See n. 25, infra.

       Section 3 (a) (14) of the Act, 15 U. S. C. § 78c (a) (14), defines “sale” and “sell” to include “any contract to sell or otherwise dispose of.” But Provident argued that the October 28 closing date was the day of sale because contractual conditions prevented the contract from becoming binding until closing. The underwriting agreement provided in paragraph 7:
      “7. Termination of Agreement: This agreement may be terminated, prior to the time the Registration Statement becomes effective, by you or by any group of Underwriters which has agreed hereunder to purchase in the aggregate at least 50% of the Debentures, if, in your judgment or in the judgment of any such group of Underwriters, there shall have occurred a material unfavorable change in political, financial or economic conditions generally.” App. A134.
      And in paragraph 5, the agreement provided: “The several obligations of the Underwriters hereunder are subject to the following conditions:
      “(h) That, between the time of execution of this agreement and the time of purchase, there shall occur no material and unfavorable change, financial or otherwise (other than as referred to in the Registration Statement and the Prospectus), in the condition of the Company and its consolidated subsidiaries as a whole; and the Company will, at the time of purchase, deliver to you a certificate of two of its executive officers to the foregoing effect.” App. A134.
      The Court of Appeals agreed that conditions to performance might prevent a contract from being a “sale” prior to closing. But it ruled that all significant conditions here were satisfied when the registration statement required by paragraph 7 became effective on October 21, the day the underwriting agreement was executed. The court also found that after October 21, Provident was no longer subject to the risk of a decline in the market for Foremost’s stock. 506 F. 2d, at 607. For reasons not apparent from its opinion, the court did not address the possibility that paragraph 5 (h) left Provident subject to market risks. See n. 8, infra.

       Our holding on this issue disposes of this case by precluding any liability on Provident’s part. We therefore do not consider whether the Court of Appeals properly rejected Provident’s arguments based on Kern County Land Co. v. Occidental Corp., 411 U. S. 582 (1973), and on the sale’s not having occurred until October 28.

       The alternative construction to “before the purchase” is sometimes denominated “simultaneously with the purchase,” as it was by the Court of Appeals. 506 F. 2d, at 608.

       Compare C. Meyer, The Securities Exchange Act of 1934, p. 112 (1934) (adopting a “before” construction), with Seligman, Problems Under the Securities Exchange Act, 21 Va. L. Rev. 1, 19-20 (1934) (adopting an “immediately after” construction).

       Compare, e. g., Munter, Section 16 (b) of the Securities Exchange Act of 1934: An Alternative to “Burning Down the Bam in Order to Kill the Rats,” 52 Cornell L. Q. 69, 74-75 (1966); Note, Insider Liability for Short-Swing Profits: The Substance and Function of the Pragmatic Approach, 72 Mich. L. Rev. 592, 616— 619 (1974); Comment, 9 Stan. L. Rev. 582 (1957) (adopting a “before” construction), with, e. g., 2 L. Loss, Securities Regulation 1060 (2d ed. 1961) (favoring an “immediately after” construction). The weight of the commentary appears to be with the “before the purchase” construction. The ALI Federal Securities Code (Tentative Draft No. 2, 1973), § 1413 (d) and Comment (6), considers the “immediately after the purchase” construction “questionable” on the statutory language and proposes an amendment to codify the result.

         Stella was decided before § 10 (b) of the Act, 15 U. S. C. §78j(b), as implemented by Rule 10b-5, 17 CFR §240.10b-5 (1975), developed fully as a private remedy for actual abuses of inside information. See 6 L. Loss, supra, n. 11, at 3559. The sale-repurchase abuse that worried the Stella court would now invite § 10 (b) liability, see n. 29, infra, as well as possible liability under § 16 (b).

       To rationalize its view as applied to the purchase-sale sequence, the court in Newmark wrote:
      “[T]he presumed access to [inside] information resulting from [the] purchase [that makes one a beneficial owner] provides him with an. opportunity, not available to the investing public, to sell his shares at the moment most advantageous to him. Thus, a purchase of shares which makes the buyer an insider creates an opportunity for the type of speculative abuse the statute was enacted to prevent.” 425 F. 2d, at 356.

       When this Court decided Reliance Electric Co. v. Emerson Electric Co., 404 U. S. 418 (1972), the question presented here was no longer in the case. See n. 25, infra.

       The view of the Court of Appeals that “at the time of” may mean different things in different contexts is not unique. See Allis-Chalmers Mfg. Co. v. Gulf & Western Industries, 527 F. 2d 335 (CA7 1975), cert. pending, No. 75-580. We express no opinion here on this view.

       Shortly before this case was argued the Court of Appeals for the Seventh Circuit reached the same conclusion on somewhat different analysis. Allis-Chalmers Mfg. Co., supra, at 347-349. The court apparently would have reached its result even in the absence of the exemptive provision, reasoning that § 16 (b) covers no transactions by any § 16 (b) insiders who were not insiders before their initial transaction. Id., at 347-348. Since we rely on the exemptive provision, we intimate no view on the proper analysis of a case where a director or officer makes an initial transaction before obtaining insider status. See, e. g., Adler v. Klawans, 267 F. 2d 840 (CA2 1959). Nor do we have occasion here to assess the approach taken by the Court of Appeals for the Seventh Circuit to the exemptive provision. 527 F. 2d, at 348-349, and n. 13. See n. 25, infra.

       The purpose of § 16 (b) is stated explicitly to be “preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer.” 15 U. S. C. §78p(b).

       Section 16 (b) states that any short-swing profits “shall inure to and be recoverable by the issuer, irrespective of any intention on the part of such beneficial owner, director, or officer in entering into such transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding six months.” 15 U. S. C. § 78p (b).

       In lieu of the Court of Appeals’ construction, Foremost offers a construction whereby any purchases prior to the purchase making one a beneficial owner are exempted from the operation of § 16 (b). See 2 Loss, supra, n. 11, at 1060.

        Newmark describes a possible abuse of inside information covered only under the Stella construction. See n. 13, supra.

       As can be seen by comparing H. R. 8720’s version of § 15 (b) with § 16 (b), supra, n. 2, the differences are relatively minor. For-maEy, the statement of purpose was moved to the front of the statute and various grammatical changes were made. A significant substantive change not apparent from the faces of the two sections is that § 16 (b) beneficial owners are those owning more than 10% of a registered security, while H. R. 8720 retained S. 2693’s 5% requirement. Compare §16 (a) of the Act, 15 U. S. C. § 78p (a), with H. R. 8720, 73d Cong., 2d Sess., § 15 (a) (1934).

       Corcoran termed § 15 “one of the most important provisions in [S. 2693]Hearings on Stock Exchange Practices before the Senate Committee on Banking and Currency, 73d Cong., 2d Sess., 6555 (1934). But most of the proposed legislation was directed at regulation of the stock exchanges themselves and certain trading practices that were considered undesirable regardless of who performed them. See id., at 6465-6466. Most of the hearings, therefore, dealt with other problems.

       The other major substantive change effected in § 15 (b) by H. R. 8720 was the elimination of the potential criminal liability. The criminal liability aspect of S. 2693’s version of § 15 (b) received almost no attention in hearings. But cf. Hearings on Stock Exchange Practices, supra, at 6966. It may have been thought, however, that a criminal case could never be made out. The difficulties of proving the mental elements on which criminal liability turned had already led the drafters to eliminate those questions of fact in civil suits to recover profits. See n. 26, infra.

       “Mr. PecoRA. The theory was that the ownership of 5 percent of the stock would practically constitute him an insider, and by virtue of that position he could acquire confidential information which he might use for his own enrichment by trading in the open market, against the interests of the general body of the stockholders. That is the main purpose sought to be served.” Hearings on Stock Exchange Practices, supra, at 7741.
      Ferdinand Pécora was counsel to the subcommittee of the Senate Committee on Banking and Currency that conducted extensive hearings on stock exchange operations prior to the enactment of the Act. He was also one of the draftsmen of S. 2693. Hearings on H. R. 7852 and H. R. 8720 before the House Committee on Interstate and Foreign Commerce, 73d Cong., 2d Sess., 83 11934).

       In Reliance Electric Co. v. Emerson Electric Co., 404 U. S. 418 (1972), the Court also had occasion to consider the application of the exemptive provision in a purchase-sale sequence. There Emerson acquired 13.2% of the shares of Reliance’s predecessor pursuant to a tender offer and within six months disposed of its holdings in two sales of 3.24% and 9.96%. The Court of Appeals for the Eighth Circuit held that the purchase, by which Emerson became a beneficial owner, was covered by § 16 (b). But it ruled that Emerson was liable for the profits on only its first sale, because “at the time of . . . sale” of the-9.96%, it was not a beneficial owner.
      The Court granted certiorari on Reliance’s petition to review this construction of “at the time of . . . sale,” and affirmed. The construction of “at the time of the purchase,” however, was not before the Court. 404 U. S., at 42CM22. Emerson thus remained liable for the 3.24% sale, although it would have had no liability under our holding today. The Court of Appeals for the Seventh Circuit has noted correctly that the construction of “at the time of . . . sale” in Reliance Electric Co. is superfluous in fight of the construction of “at the time of the purchase” adopted by the Court of Appeals for the Ninth Circuit, which we affirm here. See Allis-Chalmers Mfg. Co., 527 F. 2d, at 348 n. 12. But the procedural posture of Reliance Electric Co. prevented a full consideration of the meaning of the exemptive provision. See ibid. We express no opinion on the interpretation of the provision by which the Court of Appeals for the Seventh Circuit sought to avoid the apparent superfluity of the “at the time of . . . sale” language. Id., at 348; supra, n. 16.

       “Mr. CoRcoRAN. . . . You hold the director, irrespective of any intention or expectation to sell the security within 6 months after, because it will be absolutely impossible to prove the existence of such intention or expectation, and you have to have this crude rule of thumb, because you cannot undertake the burden of having to prove that the director intended, at the time he bought, to get out on a short swing.
      “Senator Gore. You infer the intent from the fact.
      “Mr. CorcoraN. From the fact.
      “Senator Kean. Suppose he got stuck in something else, and he had to sell?
      “Senator Barioey. All he would get would be what he put into it. He would get his original investment.
      “Mr. Corcoran. He would get his money out, but the profit goes to the corporation.
      “Senator Kean. Suppose he had to sell.
      “Mr. Corcoran. Let him get out what he put in, but give the corporation the profit.” Hearings on Stock Exchange Practices, supra, n. 22, at 6556-6557.

       This distinction is especially evident in the following exchange, directed to the reporting requirements imposed by § 15 (a) of S. 2693 on beneficial owners:
      “Senator KeaN. Suppose a man is not a director at all and does not want to be a director, and he happens to own 5 percent or buy 5 percent. Do you think you are going to get him to file with the exchange all the time just the number of shares he has ?
      “Mr. CoRCoraN. I think so, sir.
      “Senator KeaN. I think it is all right to apply it to a director or officer, but I think to require the ordinary investor-
      “Mr. CorcoraN. Five percent is a lot in a modern corporation. Many corporations are controlled by 5 percent or 10 percent.
      “Senator KeaN. They may own it or they may sell it. This applies to all corporations, and you are getting down to the point where you are interfering with the individual a good deal there. I agree with you.with respect to the officers and directors.
      “Mr. CorcoraN. A stockholder owning 5 percent is as much an insider as an officer or director. Whether he is a titular director or not, he normally is, as a practical matter of fact, a director.
      “Senator KeaN. He might not be.” Hearings on Stock Exchange Practices, supra, n. 22, at 6556.
      The distinction also is reflected in the discussion of the technical flaw in S. 2693. See id., at 6555; Hearings on H. R. 7852 and H. R. 8720, supra, n. 24, at 133. See also Hearings on Stock Exchange Practices, supra, n. 22, at 7741-7743.

       Thus, according to the presumption of the statute, the purchaser did not have access to inside information in making the purchase. It should be noted further that as a matter of practicalities the crucial point in the acquisition of securities is not the technical “purchase,” but rather the decision to make an acquisition. In the case of an acquisition of a large block of a corporation’s stock, that decision may precede the “purchase” by a considerable period of time. A prudent investor will want to investigate all available information on the corporation. Such an investor also may need time to finance the purchase, and may wish to effectuate purchases without influencing the market price. These realities emphasize that the acquisition decision by a beneficial owner normally will occur well in advance of the event that is presumed to afford access to inside information.

       Rule 10b-5 has been held to embrace evils that Foremost urges its construction of § 16 (b) is necessary to prevent. The Rule has been applied to trading by one who acquired inside information in the course of negotiations with a corporation, such as the negotiations for Provident’s purchase of the Foremost debentures. Van Alstyne, Noel & Co., 43 S. E. C. 1080 (1969); 3 Loss, supra, n. 11, at 1451-1452. And a stockholder trading on information not generally known has been held subject to the sanctions of the Rule. Shapiro v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 495 F. 2d 228 (CA2 1974); SEC v. Texas Gulf Sulphur Co., 401 F. 2d 833 (CA2 1968), cert. denied sub nom. Coates v. SEC, 394 U. S. 976 (1969). The liability of insiders who improperly “tip” others, SEC v. Texas Gulf Sulphur Co., 446 F. 2d 1301 (CA2), cert. denied, 404 U. S. 1005 (1971), may reduce the threat that beneficial owners not themselves represented on the board of directors will be able to acquire inside information from officers and directors. We cite these cases for illustrative purposes without necessarily implying approval.

      Section 16 (a), 15 U. S. C. § 78p (a), provides:
      “Every person who is directly or indirectly the beneficial owner of more than 10 per centum of any class of any equity security (other than an exempted security) which is registered pursuant to section 781 of this title, or who is a director or an officer of the issuer of such security, shall file, at the time of the registration of such security on a national securities exchange or by the effective date of a registration statement filed pursuant to section 781 (g) of this title, or within ten days after he becomes such beneficial owner, director, or officer, a statement with the Commission (and, if such security is registered on a national securities exchange, also with the exchange) of the amount of all equity securities of such issuer of which he is the beneficial owner, and within ten days after the close of each calendar month thereafter, if there has been a change in such ownership during such month, shall file with the Commission (and if such security is registered on a national securities exchange, shall also file with the exchange), a statement indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during such calendar month.”

       The drafters clearly thought that § 16 (a) would help deter abuses not covered by § 16 (b).
      “[Mr. Corcoran.] [S]ection 15 (a), requires every director, officer, or principal holder of any securities listed on an exchange to file with the exchange and with the commission a statement of how many shares he owns and to file that statement at the end of each month to show whether there has been any change in his position during the month. That is to prevent the insider from taking advantage of information to sell or buy shares ahead of the release of information to the public about the company.”
      These remarks were addressed to S. 2693. Hearings on H. R. 7852 and H. R. 8720, supra, n. 24, at 132.

       Section 16(d), 15 U. S. C. §78p(d), provides:
      “The provisions of subsection (b) of this section shall not apply to any purchase and sale, or sale and purchase, and the provisions of subsection (c) of this section shall not apply to any sale, of an equity security not then or theretofore held by him in an investment account, by a dealer in the ordinary course of his business and incident to the establishment or maintenance by him of a primary or secondary market (otherwise than on a national securities exchange or an exchange exempted from registration under section 78e of this title) for such security. The Commission may, by such rules and regulations as it deems necessary or appropriate in the public interest, define and prescribe terms and conditions with respect to securities held in an investment account and transactions made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market.” “Dealer” is defined in § 3 (a) (5) of the Act, 15 U. S. C. § 78c (a) (5).

       Section 16 (e), 15 U. S. C. § 78p (e), provides:
      “The provisions of this section shall not apply to foreign or domestic arbitrage transactions unless made in contravention of such rules and regulations as the Commission may adopt in order to carry out the purposes of this section.”

       Section 16 (b) provides in its final clause that it shall not cover “any transaction or transactions which the Commission by rules and regulations may exempt as not comprehended within the purpose of this subsection.” 15 U. S. C. §78p(b). Rule 16b-2, 17 CFR § 240.16b-2 (1975), provides:
      “(a) Any transaction of purchase and sale, or sale and purchase, of a security which is effected in connection with the distribution of a substantial block of securities shall be exempt from the provisions of section 16 (b) of the Act, to the extent specified in this § 240.16b-2, as not comprehended within the purpose of said section, upon the following conditions:
      “(1) The person effecting the transaction is engaged in the business of distributing securities and is participating in good faith, in the ordinary course of such business, in the' distribution of such block of securities;

        “ (2) The security involved in the transaction is (i) a part of such block of securities and is acquired by the person effecting the transaction, with a view to the distribution thereof, from the issuer or other person on whose behalf such securities are being distributed or from a person who is participating in good faith in the distribution of such block of securities, or (ii) a security purchased in good faith by or for the account of the person effecting the transaction for the purpose of stabilizing the market price of securities of the class being distributed or to cover an over-allotment or other short position created in connection with such distribution; and
      “(3) Other persons not within the purview of section 16 (b) of the Act are participating in the distribution of such block of securities on terms at least as favorable as those on which such person is participating and to an extent at least equal to the aggregate participation of all persons exempted from the provisions of section 16 (b) of the Act by this § 240.16b-2. However, the performance of the functions of manager of a distributing group and the receipt of a bona fide payment for performing such functions shall not preclude an exemption which would otherwise be available under this § 240.16b-2.
      “(b) The exemption of a transaction pursuant to this §240.16b-2 with respect to the participation therein of one party thereto shall not render such transaction exempt with respect to participation of any other party therein unless such other party also meets the conditions of this § 240.16b-2.”

       The press release accompanying the SEC’s initial promulgation of Rule 16b-2 demonstrates this point. It explained: “The new Rule [16b-2] affords an exemption for certain cases by providing that underwriters who happen to have a member of their firm also an officer or director of the issuer or one of its principal stockholders who are regularly engaged in the business of buying and selling securities need not account to the company for profits realized from purchases and sales made in the distribution of a security for the company . . . .” SEC Release No. 34-264 (June 8,1935).