Rule 10b-5 of the Securities Exchange Act of 1934 is intended to punish fraud in securities trading, facilitate informed investment decisions, protect capital markets from manipulation, and ensure investor confidence in securities markets. However, its poor application obstructs its effectiveness. In Carpenter v. United States, for instance, a Wall Street Journal reporter and his accomplices were prosecuted under Rule 10b-5 for misappropriating their advance knowledge of securities information that was later published in the newspaper. The journalist's misconduct not only involved using confidential information to trade profitably in the stock market but also failure to inform readers that he and others had purchased or sold based on their prepublication knowledge. The journalist's activities were analogous to a broker's failure to disclose, when he recommends a company's stock to a client, that he has already purchased that same company's stock (scalping). Scalping is serious misconduct under the Securities Exchange Act because it manipulates stock prices through a fraudulent stimulation of investor interest. Although prosecution under the scalping theory was appropriate to the Carpenter case, it was prosecuted as a misappropriation of knowledge, a less serious offense. This and other securities fraud cases illustrate the confusion and ambiguities in defining Rule 10b-5 misconduct. 47 footnotes.