Texas Gulf Sulphur Co. (TGS) began drilling on a site in Canada and found high mineral content. TGS decided that it would be desirable to purchase the site, but to make sure that it could purchase the site easily, TGS kept the results of the drilling quiet. When word of the site's high mineral content started to get out, TGS released a statement saying that the reports were exaggerated and that reports of the site's content were inconclusive. Four days later, TGS officially announced the discovery of a major copper-ore strike. In the four-day period between the release of the original statement and the announcement of the cooper-ore strike, the TGS secretary and a TGS engineer (defendants) bought TGS stock. Immediately after the official announcement, the TGS director (defendant) ordered shares of TGS stock. The director's son-in-law, a broker, also purchased shares for himself and his customers. The Securities and Exchange Commission (SEC) (plaintiff) started an investigation and eventually brought suit. After a bench trial, the United States District Court for the Southern District of New York found, among other things, that the TGS secretary and engineer violated Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 because they traded based on material inside information. The secretary and engineer appealed this decision to the United States Court of Appeals for the Second Circuit. Additionally, because the TGS director traded after the disclosure of the information in the official announcement, the district court found no violation and dismissed the complaint as to the director. The SEC appealed this decision to the Second Circuit.