with whom Me. Justice Douglas and Mb. Justice Bbennan join, dissenting.
Today the Court graves into stone Birnbaum’s1 arbitrary principle of standing. For this task the Court, unfortunately, chooses to utilize three blunt chisels: (1) reliance on the legislative history of the 1933 and *7621934 Securities Acts, conceded as inconclusive in this particular context; (2) acceptance as precedent of two decades of lower court decisions following a doctrine, never before examined here, that was pronounced by a justifiably esteemed panel of that Court of Appeals regarded as the “Mother Court” in this area of the law,2 but under entirely different circumstances; and (3) resort to utter pragmatically and a conjectural assertion of “policy considerations” deemed to arise in distinguishing the meritorious Rule 10b-5 suit from the meretricious one. In so doing, the Court exhibits a preternatural solicitousness for corporate well-being and a seeming callousness toward the investing public quite out of keeping, it seems to me, with our own traditions and the intent of the securities laws. See Affiliated Ute Citizens v. United States, 406 U. S. 128, 151 (1972); Superintendent of Insurance v. Bankers Life & Cas. Co., 404 U. S. 6, 12 (1971); SEC v. National Securities, Inc., 393 U. S. 453, 463 (1969); Tcherepnin v. Knight, 389 U. S. 332, 336 (1967); SEC v. Capital Gains Bureau, 375 U. S. 180, 195 (1963).
The plaintiff’s complaint — and that is all that is before us now — raises disturbing claims of fraud. It alleges that the directors of “New Blue Chip” and the majority shareholders of “Old Blue Chip” engaged in a deceptive and manipulative scheme designed to subvert the intent of the 1967 antitrust consent decree and to enhance the value of their own shares in a subsequent offering. Although the complaint is too long to reproduce here, see App. 4-22, the plaintiff, in short, contends that the much-negotiated plan of reorganization of Old Blue *763Chip, pursuant to the decree and approved by the District Court, was intended to compensate former retailer-users of Blue Chip stamps for damages suffered as a result of the antitrust violations. Accordingly, the majority shareholders were to be divested of 55% of their interest; Old Blue Chip was to be merged into a new company; and 55% of the common shares of the new company were to be offered to the former users on a pro rata basis, determined by the quantity of stamps issued to each of these nonshareholding users during a designated period. Some 621,000 shares were thus to be offered in units, each consisting of three shares of common and a $100 debenture, in return for $1Q1 cash.
It is the plaintiff’s pleaded position that this offer to the former users was intended by the antitrust court and the Government to be a “bargain,” since the then reasonable market value of each unit was actually $315. The plaintiff alleged, however, that the offering shareholders had no intention of complying in good faith with the terms of the consent decree and of permitting the former users of Blue Chip stamps to obtain the bargain offering. Rather, they conspired to dissuade the offerees from purchasing the units by including substantially misleading and negative information in the prospectus under the heading “Items of Special Interest.” The prospectus contained the following statements, allegedly false ánd allegedly made to deter the plaintiff and its class from purchasing the units: (1) that “[n]et income for the current fiscal year will be adversely affected by payments aggregating $8,486,000 made since March 2,1968 in settlement of claims” against New Blue Chip; (2) that net income “would be adversely affected by a substantial decrease in the use of the Company’s trading stamp service”; (3) that net income “would be adversely affected by a sale of one-third of the Company’s trading stamp *764business in California”; (4) that “Claims or Causes of Action (as defined) against the Company, including prayers for treble damages, now aggregate approximately $29,000,000”; and (5) that, based upon “statistical evaluations,” “the Company presently estimates that 97.5% of all stamps issued will ultimately be redeemed.” App. 56, 66.
Plaintiff alleged that these negative statements were known, or should have been known, by the defendants to be false since, for example, the $29,000,000 in purported legal claims were settled for less than $1,000,000 only three months later, and, as a historical fact, less than 90% of all trading stamps are redeemed. Importantly, when the defendants offered their own shares for sale to the public a year later, the prospectus issued at that time made no reference to these factors even though, to the extent that they were relevant on the date of the first prospectus, one year earlier, they would have been equally relevant on the date of the second. As a result of the defendants’ negative statements, plaintiff claims that it and its class were dissuaded from exercising their option to purchase Blue Chip shares and that they were damaged accordingly.
From a reading of the complaint in relation to the language of § 10 (b) of the 1934 Act and of Rule 10b-5, it is manifest that plaintiff has alleged the use of a deceptive scheme “in connection with the purchase or sale of any security.” To my mind, the word “sale” ordinarily and naturally may be understood to mean, not only a single, individualized act transferring property from one party to another, but also the generalized event of public disposal of property through advertisement, auction, or some other market mechanism. Here, there is an obvious, indeed a court-ordered, “sale” of securities in the special offering of New Blue Chip shares and debentures to former users. Yet the Court denies this *765plaintiff the right to maintain a suit under Rule 10b-5 because it does not fit into the mechanistic categories of either “purchaser” or “seller.” This, surely, is an anomaly, for the very purpose of the alleged scheme was to inhibit this plaintiff from ever acquiring the status of “purchaser.” Faced with this abnormal divergence from the usual pattern of securities frauds, the Court pays no heed to the unremedied wrong or to the portmanteau nature of § 10 (b).
The broad purpose and scope of the Securities Exchange Act of 1934 are manifest. Senator Fletcher, Chairman of the Senate Committee on Banking and Currency, in introducing S. 2693, the bill that became the 1934 Act, reviewed the general purposes of the legislation:
“Manipulators who have in the past had a comparatively free hand to befuddle and fool the public and to extract from the public millions of dollars through stock-exchange operations are to be curbed and deprived of the opportunity to grow fat on the savings of the average man and woman of America. Under this bill the securities exchanges will not only have the appearance of an open market place for investors but will be truly open to them, free from the hectic operations and dangerous practices which in the past have enabled a handful of men to operate with stacked cards against the general body of the outside investors. For example, besides forbidding fraudulent practices and unwholesome manipulations by professional market operators, the bill seeks to deprive corporate directdrs, corporate officers, and other corporate insiders of the opportunity to play the stocks of their companies against the interests of the stockholders of their companies.” 78 Cong. Rec. 2271 (1934).
*766The Senator went on to describe the function of each of the many provisions of the bill, including § 9 (c) which, without significant alteration, became § 10 (b) of the Act. He said, as to this section, in terms that surely are broad:
“The Commission is also given power to forbid any other devices in connection with security transactions which it finds detrimental to the public interest or to the proper protection of investors.” Ibid.
Similarly, the broad scope of the identical provision in the House version of the bill was emphasized by one of the principal draftsmen, in testimony before the House Committee on Interstate and Foreign Commerce. Summing up § 9 (c), he stated:
“Subsection (c) says, 'Thou shalt not devise any other cunning devices.’
“. . . Of course subsection (c) is a catch-all clause to prevent manipulative devices[.] I do not think there is any objection to that kind of a clause. The Commission should have the authority to deal with new manipulative devices.” Testimony of Thomas G. Corcoran, Hearing on H. R. 7852 and H. R. 8720 before the House Committee on Interstate and Foreign Commerce, 73d Cong., 2d Sess., 115 (1934).
In adopting Rule 10b-5 in 1942, the Securities and Exchange Commission issued a press release stating: “The new rule closes a loophole in the protections against fraud administered by the Commission by prohibiting individuals or companies from buying securities if they engage in fraud in their purchase.” SEC Release No. 3230 (May 21, 1942). To say specifically that certain types of fraud are within Rule 10b-5, of course, is not to say that others are necessarily excluded. That this *767is so is confirmed by the apparently casual origins of the Rule, as recalled by a former SEC staff attorney in remarks- made at a conference on federal securities laws several years ago:
“It was one day in the year 1943, I believe. I was sitting in my office in the S. E. C. building in Philadelphia and I received a call from Jim Treanor who was then the Director of the Trading and Exchange Division. He said, ‘I have just been on the telephone with Paul Rowen,’ who was then the S. E. C. Regional Administrator in Boston, ‘and he has told me about the president of some company in Boston who is going around buying up the stock of his company from his own shareholders at $4.00 a share, and he has been telling them that the company is doing very badly, whereas, in fact, the earnings are going to be quadrupled and will be $2.00 a share for this coming year. Is there anything we can do about it?’ So he came upstairs and I called in my secretary and I looked at Section 10 (b) and I looked at Section 17, and I put them together, and the only discussion we had there was where ‘in connection with the purchase or sale’ should be, and we decided it should be at the end.
“We called the Commission and we got on the calendar, and I don’t remember whether we got there that morning or after lunch. We passed a piece of paper around to all the commissioners. All the commissioners read the rule and they tossed it on the table, indicating approval. Nobody said anything except Sumner Pike who said, ‘Well,’ he said, ‘we are against fraud, aren’t we?’ That is how it happened.” Remarks of Milton Freeman, Conference on Codification of the Federal Securities Laws, 22 Bus. Law. 793, 922 (1967).
*768The question under both Rule 10b-5 and its parent statute, § 10 (b), is whether fraud was employed — and the language is critical — by “any person ... in connection with the purchase or sale of any security.” On the allegations here, the nexus between the asserted fraud and the conducting of a “sale” is obvious and inescapable, and no more should be required to sustain the plaintiff’s complaint against a motion to dismiss.
The fact situation in Birnbaum, itself, of course, is far removed from that now before the Court, for there the fundament of the complaint was that the controlling shareholder had misrepresented the circumstances of an attractive merger offer and then, after rejecting the merger, had sold his controlling shares at a price double their then market value to a corporation formed by 10 manufacturers who wished control of a captive source’s supply when there was a market shortage. The Second Circuit turned aside an effort by small shareholders to bring this claim of breach of fiduciary duty under Rule 10b-5 by concluding that the Rule and § 10 (b) protected only those who had bought or had sold securities.
Many cases applying the Birnbaum doctrine and continuing critical comments from the academic world3 fol*769lowed in its wake, but until today the Court remained serenely above the fray.
To support its decision to adopt the Birnbaum doctrine, the Court points to the “longstanding acceptance by the courts” and to “Congress’ failure to reject Birnbaum’s reasonable interpretation of the wording of § 10 (b).” Ante, at 733. In addition, the Court purports to find support in “evidence from the texts of the 1933 and 1934 Acts,” although it concedes this to be “not conclusive.” Ibid. But the greater portion of the Court’s opinion is devoted to its discussion of the “danger of vexatiousness,” ante, at 739, that accompanies litigation under Rule 10b-5 and that is said to be “different in degree and in kind from that which accompanies litigation in general.” Ibid. It speaks of harm from the “very pendency of the lawsuit,” ante, at 740, something like the recognized dilemma of the physician sued for malpractice; of the “disruption of normal business activities which may accompany a lawsuit,” ante, at 743; and of “proof . . . which depend [s] almost entirely on oral testimony,” ibid., as if all these were unknown to lawsuits taking place in America’s courthouses every day. In. turning to, and being influenced by, these “policy considerations,” ante, at 737, or these “considerations of policy,” ante, at 749, the Court, in my view, unfortunately mires itself in speculation and conjecture *770not usually seen in its opinions. In order to support an interpretation that obviously narrows a provision of the securities laws designed to be a “catch-all,” the Court takes alarm at the “practical difficulties,” ante, at 754,755, that would follow the removal of Birnbaum’?, barrier.
Certainly, this Court must be aware of the realities of life, but it is unwarranted for the Court to take a form of attenuated judicial notice of the motivations that defense counsel may have in settling a case, or of the difficulties that a plaintiff may have in proving his claim.
Perhaps it is true that more cases that come within the Birnbaum doctrine can be properly proved than those that fall outside it. But this is no reason for denying standing to sue to plaintiffs, such as the one in this case, who allegedly are injured by novel forms of manipulation. We should be wary about heeding the seductive call of expediency and about substituting convenience and ease of processing for the more difficult task of separating the genuine claim from the unfounded one.
Instead of the artificiality of Birnbaum, the essential test of a valid Rule 10b-5 claim, it seems to me, must be the showing of a logical nexus between the alleged fraud and the sale or. purchase of a security. It is inconceivable that Congress could have intended a broad-ranging antifraud provision, such as § 10 (b), and, at the same time, have intended to impose, or be deemed to welcome, a mechanical overtone and requirement such as the Birnbaum doctrine. The facts of this case, if proved and accepted by the factfinder, surely are within the conduct that Congress intended to ban. Whether this particular plaintiff, or any plaintiff, will be able eventually to carry the burdens of proving fraud and of proving reliance and damage — that is, causality and injury — is a matter that should not be left to specula*771tions of “policy” of the kind now advanced in this forum so far removed from witnesses and evidence.
Finally, I am uneasy about the type of precedent the present decision establishes. Policy considerations can be applied and utilized in like fashion in other situations. The acceptance of this decisional route in this case may well come back to haunt us elsewhere before long. I would decide the case to fulfill the broad purpose that the language of the statutes and the legislative history dictate, and I would avoid the Court’s pragmatic solution resting upon a 20-odd-year-old, severely criticized doctrine enunciated for a factually distinct situation.
In short, I would abandon the Birnbaum doctrine as a rule of decision in favor of a more general test of nexus, just as the Seventh Circuit did in Eason v. General Motors Acceptance Corp., 490 F. 2d 654, 661 (1973), cert. denied, 416 U. S. 960 (1974). I would not worry about any imagined inability of our federal trial and appellate courts to control the flowering of the types of cases that the Court fears might result. Nor would I yet be disturbed about dire consequences that a basically pessimistic attitude foresees if the Birnbaum doctrine were allowed quietly to expire. Sensible standards of proof and of demonstrable damages would evolve and serve to protect the worthy and shut out the frivolous.
Birnbaum v. Newport Steel Corp., 193 F. 2d 461 (CA2), cert. denied, 343 U. S. 956 (1952).
Just this Term, however, we did not view with such tender regard another decision by the very same panel. See' United States v. Feola, 420 U. S. 671 (1975), and its treatment of an analogy advanced in United States v. Crimmins, 123 F. 2d 271 (CA2 1941).
See, e. g., Lowenfels, The Demise of the Birnbaum Doctrine: A New Era for Rule 10b-5, 54 Va. L. Rev. 268 (1968); Boone & McGowan, Standing to Sue Under SEC Rule 10b-5, 49 Tex. L. Rev. 617 (1971); Whitaker, The Birnbaum Doctrine: An Assessment, 23 Ala. L. Rev. 543 (1971); Ruder, Current Developments in the Federal Law of Corporate Fiduciary Relations — Standing to Sue Under Rule 10b-5, 26 Bus. Law. 1289 (1971); Fuller, Another Demise of the Birnbaum Doctrine: "Tolls the Knell of Parting Day?”, 25 Miami L. Rev. 131 (1970); Comment, Dumping Birnbaum to Force Analysis of the Standing Requirement under Rule 10b-5, 6 Loyola L. J. 230 (1975); Note, Standing to Sue in 10b-5 Actions, 49 Notre Dame Law. 1131 (1974); Comment, 10b-5 Standing Under Birnbaum: The Case of the Missing Remedy, 24 Hastings L. J. 1007 (1973); Comment, The Purchaser-Seller Requirement of *769Rule 10b-5 Reevaluated, 44 U. Colo. L. Rev. 151 (1972); Comment, Inroads on the Necessity for a Consummated Purchase or Sale Under Rule 10b-5, 1969 Duke L. J. 349; Comment, The Decline of the Purchaser-Seller Requirement of Rule 10b-5, 14 Villanova L. Rev. 499 (1969); Comment, The Purchaser-Seller Limitation to SEC Rule 10b-5, 53 Cornell L. Rev. 684 (1968); Comment, The Purchaser-Seller Rule: An Archaic Tool for Determining Standing Under Rule 10b-5, 56 Geo. L. J. 1177 (1968). See Note, Limiting the Plaintiff Class: Rule 10b-5 and the Federal Securities Code, 72 Mich. L. Rev. 1398, 1412 (1974).