Lafer, Amster & Co. (LACO), a New York limited partnership, engaged in the business of risk arbitrage investing. Risk arbitrageurs purchase stock in companies they believe will experience gain in the short term; they aim to sell the stock and profit rather than to hold long term positions. LACO began to buy shares of Graphic Scanning Corp. (Graphic) in 1984. Graphic had publicly announced its intention to liquidate. By August 1985, LACO had acquired a five percent stake in Graphic, and LACO filed a Schedule 13D disclosure as required by Securities and Exchange Commission (SEC) regulations. The Schedule 13D stated that LACO did not have the present intention to gain control of Graphic, and that it supported Graphic’s decision to liquidate its business. It further stated that if Graphic indicated it would not liquidate within a reasonable period of time, LACO would reconsider its position. In January 1986, Graphic made a filing with the SEC stating that it might not proceed with a full liquidation. LACO had several meetings with Graphic. On February 3, 1986, LACO mentioned a possible proxy contest to another Graphic shareholder. On February 10, LACO filed Amendment Six to its Schedule 13D, which stated that it was considering, on a preliminary basis, waging a proxy contest for control of Graphic. On February 28, LACO filed Amendment Seven, stating that it had decided to join with another group of Graphic shareholders seeking control via a proxy contest. The SEC (plaintiff) sued Amster & Co. (defendant), the successor entity to LACO, charging it with violation of §13(d) of the Securities Exchange Act of 1934. The SEC argued that LACO was required to disclose its change in position regarding control sooner; specifically, that LACO needed to disclose its desire to wage a proxy contest before it had decided to take that course of action. Amster & Co. moved for summary judgment.