Lowe v. Securities & Exchange Commission

al. v. SECURITIES AND EXCHANGE LOWE et

COMMISSION No. Argued 83-1911. January 7, 1985 Decided June Brennan, Court, in which of the opinion Stevens, J., delivered J., filed White, JJ., O’Connor, joined. Blackmun, and Marshall, J., Burger, and Rehn- C. result, in which concurring opinion an part in decision Powell, J., no took 211. post, p. quist, J., joined, the ease. for filed briefs the cause E. Schoeman argued

Michael petitioners. for respondent. Lee the cause General argued

Solicitor Clai Deputy General Solicitor were the brief him on With Stillman, H. Gonson, Jacob Goelzer, Paul L. Daniel borne, Sirignano, Citera.* and GerardS. A. Rosenblat, David Alan Fed the American for filed urging reversal were curiae of amici * Briefs M. by Robert Organizations Industrial Congress of of Labor eration Publishers, American Gold; Association Weinberg and Laurence opinion delivered the of the Court. Justice Stevens question petitioners permanently is whether enjoined publishing nonpersonalized investment advice they commentary in because are securities newsletters 203(c) § registered under as investment advisers (Act), Act Investment Advisers Stat. 80b-3(c). § U. S. C. principal

Christopher president and share- Lowe is the Management Corporation. 1974until holder of Lowe From corporation registered as an ad- 1981, the During period viser under the Act.1 Lowe was con- misappropriating client, victed of funds of an investment engaging in business as an investment adviser without filing registration application Depart- a with New York’s up tampering fraud Law, ment of with evidence cover stealing from a bank.2 Con- client, of an investment and May Exchange sequently, 11, 1981, the Securities (Commission), hearing an after a full before Commission Judge, revoking the Administrative Law entered an order registration Management Corporation, and or- of the Lowe dering Lowe not to associate thereafter with investment adviser. fashioning remedy,

In its the Commissiontook into account petitioners solely engaged in the busi- the fact that “are now publishing advisory publications.” ness of The Commission registration petitioners revoked, noted that unless the was Rich; R. Bruce Inc., by Reporters for Freedom and for the Committee by Nancy Bregstein, Benjamin Boley, and Robert J. W. of the Press et al. Brinkmann. J. R.

Michael Klein filed brief for the American Civil Union as Liberties amicus curiae urging affirmance. Jr.,

Harry F. Tepker, filed a for the North American Securities brief Inc., as amicus curiae. Association, Administrators Management Corp., 1 Inre Lowe Transfer CCH Fed. Sec. [1981 Binder] 84,321. Rep. 82,873, p. ¶ L.

2 Id., 84,321-84,323. advisory aspects engage busi- in all be “free to would publishing them activities afforded their and that even ness” self-dealing.”3 dishonesty “opportunities for year this commenced later, A little over a Commission by filing complaint District in the United States action alleging that York, Eastern District of New for the Court Management Corporation, and two other the Lowe Lowe, violating corporations,4 Lowe was and that Act, were charge principal violating order. Commission’s (pe corporations complaint three was that Lowe and the the titioners) publishing newsletters two investment were soliciting subscriptions service. The com for a stock-chart publications, petition through plaint alleged those that, advising engaged others “as to the in the business ers were advisability selling investing purchasing, or securities in, regular issuing reports part . . . business . . . and as a petitioners concerning none of the Because securities.”5 registration registered exempt Act, under the advisory with the busi of the mails connection the use 203(a) § allegedly the Act. The violated Commission ness prayed restraining permanent injunction the further for a advisory publications; petitioners’ distribution of 3The Commission wrote: but, egregious punish respondents light of their mis- do not seek to

“We conduct, public from the future harm at their hands. protect we must case, taken evaluating public requirements in this we have In interest they solely engaged in respondents’ are now into account statement However, respondents advisory publications. publishing business And, advisory business. as engage aspects free to in all are still noted, present activities afford Judge even their the Administrative Law self-dealing.’ ‘opportunities dishonesty and numerous for public circumstances, convinced that the interest all the we are “Under registrant’s registration, adviser the revocation of requires Id., any at investment adviser.” of Lowe from association bar 84,324. 4 Publishing Corporation and corporations are the Lowe The other two Service, Inc. the Lowe Stock Chart

5 App. 18.

185 for a permanent injunction enforcing compliance with the order of May 11, 1981; and for other relief.6 three

Although publications are involved in this litigation, only one need be described. A issue typical of the Lowe Investment and Financial Letter contained general commen- tary about the securities and bullion markets, reviews market indicators and investment strategies, specific recommendations for buying, selling, holding stocks and bullion. The newsletter advertised a “telephone hotline” over which subscribers could call to current get information. The number of subscribers to the newsletter ranged 3,000 to 19,000. It was advertised as a semimonthly publica- tion, but only issues were eight in published the 15 months after the entry the 1981 order.7

Subscribers who testified at the trial criticized the lack of regularity of publication,8 but no adverse evidence concern- ing quality publications offered. was There no evidence that Lowe’s criminal convictions were related to the publications;9 evidence no that Lowe had in engaged 6 Id., at 28-26. 7Id., 32, at 78-85. Advisory The Lowe Stock paid had sub published only scribers and had four May issues between 1981 and its last analyzed issue March 1982. It also and commented on the securities and markets, specialized bullion lower-priced but stocks. Subscribers were they advised that periodic could receive updated letters with recommenda specific about tions securities and also could make use of the telephone (EDNY 1983). hotline. Supp. 556 F. Petitioners advertised the Lowe weekly Chart Service as a publication that would contain charts all for securities listed on the New York and American Exchanges, Stock 1,200 actively and for the most stocks, traded over-the-counter aswell gold on prices charts and silver and market indicators. Unlike the other publications, two it propose did not any specific to offer investment advice. Although there were approximately subscribers, pub no issues were Ibid.; lished. App. regular subscription 32. rate was for 3 $325 year. months $900 8 Id., 38, 42, 46, 58. 9In addition to the 1977 and 1978 gave convictions that rise to the Com order, mission’s 1981 Lowe was convicted two counts of theft deception through Id., the issuance of worthless checks. at 74-76. 186 subject of any the that were activity

trading securities that publications; no contention and in the comment advice or any advisory had published services in the information misleading.10 materially false or been Commis- the part, denied District Court the the most For (EDNY Supp. requested. 556 F. relief it the sion giving informa- 1983). enjoin petitioners from did The court telephone, letter, or by individual their subscribers tion to continuing enjoin their them from person, to it refused but disgorge require to them to publication or activities Court publications.11 The District earnings the the not differenti- did acknowledged the the face of statute that activity advisory the persons whose ate between reports suggestions, impersonal investment “publication of person-to-person analyses,” who rendered those and sug- considerations constitutional that concluded advice, but determining After a distinction.12 gested such need for protected the First publications petitioners’ were that Act must be held the District Court Amendment, comply willing publisher who is to allow construed regis- requirements to existing reporting and disclosure publishing purpose material such the limited ter for publishing.13 engage such Appeals the Second panel splintered of the Court

A majority first The F. 2d reversed. Circuit Supp., at 1361-1362. 10 556F. publi claim that rejected the Commission’s also Court The District criminal Lowe’s they disclose did not because were fraudulent cations Management of Lowe registration revocation convictions any rules promulgated had noting Commission Corporation, Id., 1371. at such disclosure. requiring 12 Id., 1365. at has publisher who “When wrote: 13 Id., District Court 1369. been invoked have against whom sanctions registration been denied requirements disclosure record, reporting and fully with the complies publishing purpose register for Act, be allowed he must under the Ibid. publish.” petitioners engaged

held that were in business as “invest ment meaning advisers” within the of the Act. It concluded distinguish that the Act person-to-person does not between impersonal given printed advice and publications.14 advice in key statutory question Rather, its view, the was whether §202(a)(ll)(D), exclusion §80b-2(a)(ll)(D), 15U. S. C. publisher any for “the newspaper, maga bona fide news publication general zine, or business or financial regu applied petitioners. lar circulation” Relying to the on its decision in v. Transcript Corp., SEC Wall Street 422 F. 2d (1970), cert. denied, U. Appeals S. 958 the Court of inapplicable.15 that the concluded exclusion was Appeals rejected petitioners’ Next, the Court of constitu- reasoning tional claim, “precisely that this case involves regulation kind activity permissible of commercial under the First Amendment.”16 Moreover, it held that Lowe’s history acting of criminal conduct while as an investment justified adviser publications the characterization of his “as potentially deceptive speech.”17 commercial The Court of Appeals ruling petitioners “may reasoned that a not sell purchase, their views as holding to the sale, or of certain saying is no securities from lawyer different that a disbarred may legal Finally, not sell advice.”18 the court noted that holding prohibition its against selling limited to a advice specific to clients about securities.19 Thus, the Court 2d, 725 F. at 896-897. 15 Id., at 898. 16 Id., at The additionally rejected 900. court petitioners’ claim that “the

Act equal protection by violates subjecting investment newsletters, but not Id., newsletters, bona regulation.” fide n. 5. 17 Id., at 901. 18 Id., at 902. 19At the end of opinion, its the Court Appeals wrote: “Finally, we note what this holding does not entail. Lowe pro is not hibited publishing stating his any views as to matter of current interest, otherwise, economic or such as war, the likelihood of the trend rates, interest whether the next election will affect conditions, market continue could petitioners assumed that apparently Appeals modified to if content was their newsletters their publishing securities.20 about specific exclude advice although acknowledging separately, concurred judge One dissenting opinion.21 court’s his agreement as a hold himself out not may Lowe agreed that judge in any engage adviser and registered but his publications, in connection with activity fraudulent prior an invalid authorized majority the had concluded constitutionally protected of publication on the restraint have he would question, the constitutional To avoid speech. the Act.22 construction of Court’s the District adopted I—I constitu- the important to consider certiorari granted We the against publication an injunction whether tional question Anti-Dumping protect Act basic the enforcement of or whether future likely. He is industry foreign competition is from American smokestack and circula- newspaper general of interest publishing a prohibited from not somebody publishing recommendations prohibited from tion. Nor is he editor, What he is or writer. newspaper employee, as an fide else’s bona counsel, analysis and selling advice and doing is to clients prohibited from advisability of as to the specific to the of securities reports as value Ibid. holding specific securities.” selling or investing in, purchasing or following footnote: appended It dealing publication day question whether leave to another “We only making generally recommendations market indicators (e. transport, beverages-brewers, mobile g., air securities groups as to Id., 902, at homes) those of this case.” on facts such as could be barred n. 7. apparent unwilling explain whether its Appeals did not Court on its requested based all of relief grant the ness to Commission publication would avoid in the of the content opinion that a modification peti assumption that or on the statutory of “investment adviser” definition omitting specific right publish newsletters tioners have a constitutional recommendations. 21Id., at 902-908.

22 Id., 903. petitioners’ distribution of prohibited by newsletters is (1984).23

the First Amendment. 469 U. S. 815 Petitioners injunction contend that such an very at the strikes foundation press subjecting freedom the it to license cen- sorship, g., City see, e. Lovell v. Griffin, 303 U. S. (1938). Brief for response Petitioners 15-19. In argues Commission history that the abuses the securi- industry amply justified Congress’ ties require decision to registration of regulate profes- advisers, to their sional activities, and, as an regulation, incident to such prohibit unregistered unqualified persons engaging in that Respondent business. Brief for Konigsberg 10; cf. v. State Bar California, 366 U. S. 50-51 In reply, petitioners acknowledge person-to-person com- munication in setting may commercial subjected regulation impermissible that would be public in a forum, cf. Ohralik v. Ohio State Bar Assn., 436 U. S. 447, 455 (1978), regulated but contend that class—investment broadly sobe encompass defined as to advisers— distribution of

impersonal investment advice and commen- tary public Reply market. Brief for 1-4. Petitioners parties’

In order to evaluate the arguments, constitutional obviously necessary it is first to precisely understand, as possible, the extent to which the Act regu- was intended to 23Petitioners’ submission this Court does not challenge validity the of the Commission’s order revoking the registration of Lowe Management Corporation barring and Lowe from future association with an investment 203(e) adviser. Section Act, of the 15 § U. S. 80b-3(e), C. authorizes the Commission to registration revoke the any of investment adviser if finds, it after notice an opportunity and for hearing, that such revocation is in the public interest and that investment adviser has committed certain types of crimes. 203(f), Section § 15 U. 80b-3(f), S. C. authorizes the Commission to bar the association of person with an investment ad viser if he has committed acts justify that would the revocation of an in vestment registration. adviser’s Moreover, petitioners do not challenge the District holding they may Court’s that operate a direct line” “hot desiring personalized subscribers advice. 190 that and reasons advice investment of

late the publication More- regulation. such to authorize Congress motivated decide a constitu- “not we should fact that of in view over, to which upon other ground if there some tional question the Dis- fact that the further case,”24 and dispose of Appeals in the Court judge dissenting and the trict Court statutory on decided case should believed both eliminate, either the statute study careful grounds, must we question limit, the constitutional narrowly of the back- review awith begin therefore We confront. legislative on focus awith particular of the Act ground that Con- the profession the character describing history regulate. intended gress

J—I HH Capital Bu Gains Research SEC v. observed As we the last 1940 was Inc., Act of reau, Advisers “Investment in the certain abuses to eliminate designed of acts in a series to have contrib found were which abuses industry, securities the depression 1929 and crash market to the stock uted Utility in the Public its genesis Act had the 1930’s.”25 and di “authorized 1935, which Act of Company Holding and the functions study make a “to the Commission rected” . . . companies investment investment trusts activities its recommendations study of its results report and to 1937.”26 Pursuant January or before Congress Congress transmitted the Commission instruction, this in management, counsel, investment on investment study its services.27 advisory supervisory, vestment (1984) (per McMillan, 466 U. S. Florida v. County, Escambia A, ante, v. TV Parker, Ashwander 123; curiam); also Atkins v. see J., concurring). (1936) (Brandeis, 288, U. S. 25 omitted). (footnote (1963) 180, 186 S.U. 837. 49 Stat. Report Companies, Investment Trusts and See Investment 30 of the Public Commission, to Section Pursuant Exchange and Securities

The Report focused on “some of the more important prob- lems of these investment counsel organizations”;28 signifi- cantly, the Report stated that it “was intended to exclude any person organization which was engaged the busi- ness of furnishing investment analysis, opinion, or advice solely through publications distributed to a list of subscribers and did not furnish specific advice to client with respect to securities.”29

The Report traced the history growth counsel, noting the profession did not emerge until after World War I.30 In the 1920’s “a distinct class of . persons . . held themselves out as giving only personalized investment advisory service”; rapid growth began 1929, and markedly increased the mid-1930’s in response “to the demands of the investing public, which required supervision its secu- rity investments after its experience during the depression years.”31 Utility Holding Company Act of Counsel, Investment Investment Management, Investment Supervisory, and Advisory Investment Serv-

ices, H. R. Doc. Cong., (1939) (hereinafter No. 76th 2d Sess. cited as Report).

28 Id.,atlll.

29 Id.,at 1. 30 Id.,at 3. 31Id., at 5. detailing After geographic distribution, forms, the sizes of firms, investment-counsel Report analyzed the affiliations of the firms. It noted that “[a]ll investment counsel firms have not re their stricted business interests or supervision activities to the accounts of their Id., investment clients.” at 11. Of the investment- counsel firms surveyed, approximately published 5% investment manuals periodicals; firms, these latter 80% were without investment- company clients. Ibid. The posited Commission that affiliations with publishers of investment periodicals manuals and “may be attributable to the fact that research and organizations statistical are not uncommon with these Id., businesses.” at 12. Report analyzed also the nature of services of investment-counsel firms to their clients: powers “The of investment counsel firms respect manage to the ment funds of their investment company clients were either dis- Re- the counselors, investment Regarding functions of the representatives invest- of “[s]ome the port of that stated invest- primary of urged function the that firms ment counsel personal basis, on a clients, to ‘torender counselors was ment regarding the advice competent, and continuous unbiased, Nevertheless, management investments.’”32 of their sound conceded: counselor investment one noted that it pro- are who gradation from individuals “[Y]ou have a being any pretense of tipsters make do not fessed type indi- of way up the anything the scale all else, impartial give sci- you say, desires who, vidual, trying to persons are who professional advice entific accomplish- light in the of plan situation their economic age, making provision educa- for old ing results, various readily you . . . see can However, forth. and so tion, problem, we as far as very significant part of that that possibly one, is, shall most vital concerned, and are fringes. . . .”33 say, on the the individuals we in industry functions viewed Representatives of the they concluding differently, that slightly counselors vestment substantial with institutions serve “individuals should supervision invest their require continuous funds who eco entire their program cover of investment to ments and vesting an imply with Discretionary powers advisory. cretionary or power to funds, with the client’s control over counsel investment firm purchase to the sale respect with determination ultimate make the powers advisory contrast, vesting In portfolio. client’s for the securities rec- the firm make merely firm means counsel an investment with accept power ultimate client, rests the to its whom ommendations Id., 13. at recommendations.” reject such powers, discretionary surveyed had the firms one-third Approximately “custody portfolio rarely assumed ibid,.; however, all firms surveyed clients,” id., at 15. company investment of their securities 32 Id., 23. at

33 Id., 25. Turning

nomic problems needs.”34 to the of investment Report counselors, the they concluded fell within two “(a) categories: problem distinguishing between bona fide ‘tipster’ organizations; counselors and and (b) problems involving those organization operation the and of investment counsel institutions.”35 34Ibid. Moreover, the representatives pointed out that there a dif ference between the functions of investment counselors and investment companies: “. . ordinary . [T]he investment trust management type gives its a diversification,

holder probably beyond ability the of the small investor obtain on his capital. own It gives also him management. It does not any cognizance take distinction is that it takes cognizance no of his —the position total financial in investing money him, his for distinguished and is counsel, investment gives that it him judgment no in the matter . whatever. . . Now, “Q. you say the true as you it, conceive an investment function counselor, give is to advice in with connection the specific condition aof particular individual? “A. Yes. “Q. While the investment trust does not have personal it, element manages it the more on an impersonal basis? funds right.

“A. That is “Q. ‘Impersonal’ being used they may sense that try get a com- denominator, mon they or what envision their stockholders’ condition be, or what would be best cross-section of the public, American but give not does the advice peculiar, with the particular, specific con- financial dition of the individual hopes he what to accomplish, or what purpose. Might “A. I also add that in a least, number of cases at as Mr. Dunn said yesterday, the investment trust managers do not their consider funds as a proper repository for all of capital. an individual’s It is not that doesn’t it personal consider peculiarities his needs, it but does not him give complete program.” Id., financial 26-27 (testimony at of James N. Seudder, Clark) White of added). Stevens & (emphasis 35 Id., Moreover, at 27. industry representatives “felt that investment organizations counsel completely could not perform their basic function— furnishing to personal clients on a competent, basis unbiased, and continu ous regarding advice management sound of their investments —unless in the preparation “culminated work The Commission’s some with which, of the bill Wagner Senator introduction 1940.”36 Act Advisers Investment became changes, Titles; two 3580, contained bill, S. Wagner’s Senator a defini contained companies, investment concerning first, concerning second, but adviser,”37 “investment tion of the introduction After advisers, did not. investment at hearings lengthy held Subcommittee 3580, a Senate S. advisers investment concerning statements numerous which client were and the counsel interest between all conflicts conclusion, summarized: Report, near its Id., 28. removed.” ex- public at the representatives opinion unanimous “It was some serve voluntary organization would that, although a . . . amination ele- the most cope organization could an salutary purpose, such industry counsel problem of the investment fundamental mental and —the unethical incompetent and includes those ‘fringe’ which counsel investment fide invest- as bona represent themselves who organizations or individuals not could organizations and individuals These ment counselors. their of of the nature membership, but because of requirements meet or supervision voluntarily submitting consider not even activities would Id., at 34. policing.” S., Inc., at 189. Bureau, 375 U. Research Capital Gains 36 SECv. adviser”: of “investment following definition contained S. 3580 “ engages who, compensation, for any person means adviser’ ‘Investment or through publications directly or others, advising either in the business investing advisability of as or of securities writings, to the value as as compensation part and securities, who, or for selling in, purchasing or concerning reports analyses or promulgates business, issues regular accountant, (B) lawyer, (A) bank; any include securities; does not but inci solely is such services performance of teacher whose engineer, or (C) fide bona publisher profession; of his practice dental to the (D) per circulation; such other general newsmagazine of newspaper or may des as the Commission paragraph, of this the intent sons, not within Hearings 3580 before on S. or order.” regulations and ignate rules on Committee Exchange Senate and on Securities Subcommittee (Senate (1940) Sess., pt. p. 27 Cong., 3d 76th Banking Currency, and Hearings). (C) is in S. publishers clause for exclusion noteworthy that the It is n. Act. See final draft as exclusion

not as broad infra. distinguishing were received.38 One witness the investment- profession counsel from investment firms and businesses, explained:

“It is a personal-service profession and its depends for success a close upon and personal relation- confidential between the ship investment-counsel and its client. firm It requires and frequent contact personal a profes- sional nature between us and our clients. . . . must

“We establish with each client a relationship of trust and to last over designed a period confidence 38Douglas Johnston, T. Vice President of the Investment Counsel Associ America, part: ation of stated

“The definition of given ‘investment adviser’ bill, as in the in spite of cer- exclusions, tain quite is broad and covers a number of services which are entirely different in scope their and in operation. their methods of For example, as we definition, among others, read the it would include those companies publish which manuals of securities such Moody’s, Poor’s, and forth; so it would companies include those issuing weekly investment let- Babson’s, ters such as Service, United Statistics, Business Standard and so forth; tipsters it would include through those who newspaper advertise- send, ments offer price, for a nominal a list of go stocks that are sure to up; it would include certain banking investment brokerage houses which maintain advisory departments charges make rendered; finally services it would include operate those firms which professional basis and which have comé recognized to be as investment counsel. why thought

“Just it public to be in the interest at require this time to register with, all the above services regulated by, and be the Federal Government we do not know. “I important have mentioned exceptions certain in exclusions the defini- advisers’; tion of ‘investment principal one of lawyers. of these is Probably aggregate in the more investment given by lawyers advice is

than all other only advisers combined. I point want to out that in so acting they functioning strictly lawyers. are not know, as far I So no part courses on investments curriculum, are of a law school passing nor in lawyer bar examinations pass does a have to a test on investment.” Sen- Hearings ate 711-712. out themselves work

time because economic forces years cycles last for slowly. and investment Business long- similarly plans have to be our and long remain range. firm could counsel No investment through except of real benefit clients or be business long-term . . . associations. such Judgment and of the client’s circumstances . “. . objectives of the risks he and financial of his soundness Judgment root branch is the assume. security changes in client’s to recommend decisions profession, holdings. as we counsel If the investment judgment offer this kind could not it, have described experience supporting it information, would its with bought anything could not be to sell that have not . . . bookstore. almost unsophisticated in not our clients are

“Furthermore, They men and are resourceful financial matters. very in their examina- are critical of means who women they disapprove performance. of our If tion of our they us, which cancel their contracts activities, of income. source eliminates our tipsters, clearly quite run’ nor do not ‘hit and are “We length through the clients at arms’ deal with our we newspapers advertising mails; or the columns of the major regard if are unable defeat we it as fact, we frequent personal client and with contact with a have publish dependents. We do his associates compendium general a statistical service or distribution general or financial recommen observations economic hackneyed phrase, our business To use a dations. ”39 ‘tailor-made.’ 39 Id., O’Hearn) added); (emphasis (testimony of Charles M. at 713-716 (“The id., to his client is relationship of investment counsel at 719 see also The investment involving trust and confidence. essentially personal one professional advice con to his client function is render sole counselor’s appropriate to that client’s his funds in a manner cerning investment of David Schenker, Chief Counsel of the Commission’s In- vestment Trust Study, summarized the extent of the pro- posed legislation: “If you have been convicted of a crime, you cannot be an investment counselor you cannot use the mails to perpetrate a fraud,” Senate Hearings 996. Schenker provided the Subcommittee with a significant re- port40 prepared by the Research Department of the Illinois Ibid. Legislative Council. Referring possible regulation of investment in counselors the State of Illinois, the report stated part:

“Regulatory statutes concerning investment counselors appear exempt from their provisions those who fur- nish advice without remuneration or valuable consider- ation, apparently because it is thought impracticable to regulate such gratuitous services. Newspapers journals generally also seem to be excluded although this is not stated explicitly statutes, exemption apparently being based on general constitutional legal principles. needs”) (statement of Alexander Standish); (the id., at 724 “function of rendering to personal, clients —on a professional competent, un- basis — biased, and continuous advice regarding the management sound of their investments, (statement steady has had a growth”) of Dwight Rose, C. President, Investment Counsel Association of America); (“In- id., at vestment sprung counsel have being into in response to requirements of individuals for personal individual advice respect to the handling of their affairs . . . the genesis whole of investment counseling personal is a professional relationship”) (testimony of Berle, Rudolf P. General Counsel, Investment Counsel America). Association of 40It should noted that the report Illinois by submitted Schenker April 26, 1940, more than three weeks after the quoted statement White, post,

Justice Contrary 219. to Justice suggestion, White’s there nothing legislative history to Congress indicate rejected report’s proposed distinction between advice solely distributed “to a list of subscribers” and advice to “clients.” It is undisputed that Congress broadened scope publications” fide “bona exclusion after the Commission submitted report. the Illinois See n. supra, and n. infra. defining application problem

“A particular of the ex- arises counselors investment regulating law investment who and individuals istence furnish firms of as such means publications. by solely advice Insofar of advice specialized also render and individuals firms to any regulatory subject be clients, they might individual arises, how- The question be adopted. measure the same which give services or not to whether as ever, some circu- means of clients, by all their advice general of in a type engaged actually are publication, other lar or is feasible. regulation to which counseling investment through function which services “These investment than rather subscribers, their sent publications several advice, present would individualized through investment counselors in regulating found not difficulties of agen- number large place, the first In generally. is and interpretations facts publishing cies staff would administrative a very large and known, well Secondly, registration. enforce detailed required and by newspapers by both is supplied information such The accepted and services. journals financial specialized law due process and the press rights of of of freedom also perhaps regulation general any prevent might even publications, types particular over supervision of occasionally these publications advertisements of if the value exaggerate quite information factual of guarantee That constitutional is supplied. which to publications is applicable the press liberty of of been clearly has to newspapers, not only all types, [citing Court Supreme States the United indicated (1938)]. . . . S. 303 U. Griffin, v. City Lovell and practi- reasonable formulating problem “To the must, accord- factual services for the regulations cable difficulties and constitutional the legal be added ingly, individual regulation attempted inherent organization functioning primarily by published means of circulars and volumes. liberty press However, of the an right, not absolute types regulation some may be both constitutional and assuming feasible, regulation thought of some sort is reg- desirable. Such probably ulation could legally take the form of li- censing publications prohibiting types pub- certain Regulation lications. publishing of investment advice in order to conform require- with constitutional probably ments, would have to punish- be confined to ing, by civil or penalties, criminal perpetrate those who attempt or perpetrate specific frauds or other acts contrary declared to be to law.

“It may be thought desirable specifically to exclude regulation the publishers generalized investment of information, along with those who economic ad furnish vice generally. This be may done by carefully defining the term ‘investment counselor’ so as to exclude ‘any or person organization which engages in the business furnishing investment analysis, opinion, of or advice solely through publications distributed to a list sub of scribers and not furnishing specific advice to any client with respect securities, and also or persons organiza tions furnishing only economic advice and not advice relating to the purchase or sale securities.’”41 of After the Senate hearings Subcommittee on S. 3580, and meetings after by representatives attended of investment- voluntary adviser firms, association of investment advisers, and the Commission, a revised bill, reported S. by 4108, was the Senate Banking Committee on Currency. and In the Report accompanying the revised bill, the Committee on Banking Currency and wrote: public

“Not protected must the be from the frauds misrepresentations and unscrupulous tipsters and 41 Id., added) (footnotes 1007-1009 (emphasis omitted). safe- must adviser fide investment bona

touts, but indi- of these activities stigma against guarded exist restrictions no limitations Virtually viduals. individuals integrity honesty to the respect controlled, managed, to be funds solicit may who convicted have been who may Persons supervised. of securities of perpetration because courts by enjoined advisers. investment role of to assume are able fraud class a certain that with respect II recognizes “Title relation advisers, a personalized type of ship a consequence, As clients. with their exist be considered should which ais this relationship factor the Commission with the in connection enforcement this bill.”42 the provisions of of Represent- the House before introduced 4108 was S. hearings,44 After additional 10065.43 R. as H. atives added). (1940)(emphasis Sess., 21-22 Cong., 3d 76th Rep. No. 42 S. the House Commit a Subcommittee R. before Hearings H. on Sess., 1 Commerce, 3d Cong., 76th Foreign Interstate and tee I adviser,” Title one in of “investment definitions two contained bill advisers). (investment II in Title (investment the other companies) read, part: in The latter definition “ engages who, compensation, any person for means adviser’ ‘Investment or through publications directly or others, either advising of the business in investing advisability of as to the or value of securities writings, as part and as securities, who, compensation for or selling or in, purchasing, concerning analyses reports or business, promulgates regular issues of a (D) any fide of publisher bona . . . securities; not include does but general of publication financial magazine or business newspaper, news Id., at 45. ...” regular circulation. and (C) the exclusion in clause of publishers the exclusion

Whereas circulation, the exclusion newspapers general only mentioned 3580 S. cir- general regular “of and (D) newspapers R. 10065 includes of H. clause publications. See or financial” encompasses “business also culation” 37, supra. n. Com of the House R. before 44 Hearings H. Subcommittee Cong., Commerce, 3d Sess. Foreign 76th on Interstate mittee

Committee on Interstate and Foreign Commerce wrote its Report accompanying bill:

“The essential purpose of Title II of this bill is to pro- tect the public the frauds and misrepresentations of unscrupulous tipsters and touts and to safeguard the honest investment adviser against the stigma activities of these individuals by making fraudulent practices by investment advisers unlawful. The title also recognizes personalized character the serv- ices investment advisers and especial care has been taken in the drafting the bill to this respect relation- ship between investment advisers and their clients.”45 added.) (Emphasis (1940). During the hearings, testimony personal about the nature of the

investment-counseling profession again emphasized: “When the hearings were held on this bill before the Senate committee the opposed association it. opposed We it for general three First, in reasons: the original bill there was a confusion between investment counsel in- vestment trusts. We felt that the personal relationship confidential exist- ing between investment counsel and his client very was so different from the commodity of investment trust shares which investment trusts were engaged in selling, legislation regulate these two different ac- tivities should be incorporated in separate acts. In the bill we felt that our clients were not properly protected in their confidential relationship. . . . “Following the hearings before the Senate subcommittee, we had con- ferences with the Securities and Exchange Commission, and all of our objections have been satisfactorily adjusted. . . .

“The Investment Counsel Association of America unqualifiedly endorses present (statement Id., bill.” Dwight Rose, representing Investment Counsel Association of Y.). America, York, New N. 45 H. Rep. R. No. 76th Cong., Sess., 3d The terms counsel,” “investment “investment counselor,” and “investment adviser” were used interchangeably throughout legislative history. That the terms were understood to share a common definition is best demonstrated by the testimony of the Commission’s David Schenker. While describing the Commission’s initial report to Congress, he stated that “we learned the existence of 394 investment counselors.” Hearings Senate 48. On II in Title of “investment adviser” included The definition in all rel- 848-849, when the Act was Stat. passed, identical to the definition before the Court evant respects today.46 exist- very page hearings, he stated that “we learned of the next White, however, Id.,

ence of 394 investment advisers.” at 49. Justice 221-223, 7, correctly statutory of an post, at n. that the definition observes persons qualify coun- encompasses “adviser” who would not as investment engaged rendering they primarily are not in the business of sel because to the investment of funds. . . .” 15 U. S. C. “continuous advice as 2(a)(13) added). follow, (emphasis But it does not § Justice 80b— assume, per- that the term “investment adviser” includes White seems to personal relationship no at all with their customers. The sons who have statute, 54, infra, repeated use of the term “client” in the see n. contra- person merely publisher suggestion dicts the that a who is of nonfraudu- regularly periodical general in scheduled circulation lent information fiduciary relationship designed regulate. the Act was has kind “specifically ex 46 Accordingto Justice witness James White White, persons plained Representative Boren that whose advice was furnished solely through excepted from publications were the class of investment Post, (emphasis original). in in This advisers as defined the Act.” at 220 reading Representative question is incorrect. Boren asked a based on his I, separate definition of “investment adviser” Title which con companies. response, cerned investment In White indicated to Boren that definition; reading wrong quoted he was White then the basic definition II, question of “investment adviser” from Title answered the separate there were definitions under the two Titles. The rele whether colloquy vant reads as follows: correctly, person furnished

“Mr. Boren: If I read the bill whose advice is through solely through publications distributed subscribers the form publications, they specifically exempted. are monthly

“Now, exempted puts out a person should that be who weekly newspaper, say, advising people will on that? we you page from which are you enough give kind “Mr. White. Will reading? reading page in the Well, page it 154. I am from

“Mr. Boren. is on other bill. It is a little differ- advisers this definitions of investment from page in this bill. ent numbers a second definition. Healy. May suggest I that there is “Mr. an investment company, That is an investment adviser “Mr. White. in title II. an investment adviser

which is different I—<HHHH The basic definition of an investment adviser in the Act reads as follows:

“ ‘Investment adviser’ means any person who, for com- pensation, engages in the business of advising others, either or directly publications through or writings, as to the value of securities or as to the advisability investing in, purchasing, or selling securities, or who, for compen- sation and as of a part regular business, issues or promul- gates or analyses reports concerning securities. . . .”47 Petitioners’ newsletters are distributed “for compensation and as part of a regular business” and contain they “analyses or reports concerning securities.” Thus, on its face, “Mr. I Boren. see. “Mr. [reading White the definition from bill]. An investment adviser

in title II any person means who, for compensation, engages in the busi- ness of advising others, either directly through or publications or writings, to the as value of securities as to the advisability of investing in, pur- chasing, or selling securities, or who for compensation and part of a regular business, issues promulgates analyses or reports concerning securities. “Mr. Boren. Then there is a separation distinct of investment advisers under the two different sections of the bill. “Mr. White. Yes.

“Mr. Boren. Then that- me, clarifies it for Mr. Chairman. I you. thank “Mr. Cole. I all, believe that is Mr. you. White. Thank “Mr. you.” White. Thank Hearings on H. 10065, R. supra, at 90-91 (emphasis added). It should also be noted that the last item from the legislative history that Justice White support uses to his interpretation of the Act is lan- guage from S. Rep. No. 1775. post, See at 221. The language should be read in the context of all the legislative history, particularly in the context of H. Rep. R. No. which followed Rep. S. No. 1775 and which accompanied the final version of the Act before passage. The later Report stated unambiguously: “The title . . . recognizes personalized character of the services of investment advisers.” H. R. Rep. No. at 28. §80b-2(a)(ll).

47 15U. C.S. petitioners. definition, how- The applies to definition basic catego- several Act excludes absolute. far from ever, adviser, of an investment persons definition from its ries of registered, not be who need advisers lists certain other “such to exclude Commission authorizes and also by rule or order.48 may designate person” itas publisher of statutory for “the is exclusions the ofOne magazine or financial newspaper, business news fide bona Although regular circulation.”49 general and publication of history legislative defines its Act nor the of the text neither tolerably points seem two scope exclusion, this precise of the publications that exclude Congress not intend did clear. part of as a normal by advisers investment are distributed legislative his- servicing The clients. their of the business primarily Congress inter- was that tory plainly demonstrates personalized rendering of regulating the business ested including publishing that are activities advice, Congress, hand, the other On thereto. incident normal a wanted concerns, Amendment First plainly sensitive through press regulate the seek to it did that make clear publishing nonpersonalized activities. licensing of the major First undoubtedly of two aware Congress was the enact- before decided this Court that cases Amendment Olson, rel. ex v. Minnesota Near first, The the Act. ment of press, “liberty the (1931), that established 697 S. 283 U. by liberty safeguarded the due the speech, is within and of invasion Amendment Fourteenth process the clause emphati- the Court Near, In 707. at by Id., action.” state guarantee press purpose” cally the “chief stated upon publication,” id., previous restraints prevent “to was at issue statute nuisance Minnesota held that 713, prior it authorized because unconstitutional was that case publication. restraint City Lovell v. years the Court decided later, seven

Almost expressly (1938), that was case S.U. Griffin, 80b-3(b), 80b-6a. 80b-2(a)(ll)(F), §§ 49 80b-2(a)(ll)(D). § by during noted the Commission the Senate Subcommittee hearings. striking In down an prohibiting ordinance distribution of city literature within the permit, without a Court wrote:

“We think that the ordinance is invalid on its face. Whatever the motive adoption, which induced its its character such that it very strikes at the foundation of press by the freedom of subjecting it to license and censorship. struggle press the freedom of the primarily against power directed of the licensor. against power It was that John Milton directed his ‘Appeal assault his Liberty for the of Unlicensed Printing.’ liberty press And the initially became right publish formerly ‘without a license what could published only with one.’ While this freedom from previous upon publication restraint regarded cannot be exhausting guaranty liberty, prevention leading that restraint purpose adoption in the of provision. the constitutional . . . liberty press

“The newspapers is not confinedto periodicals. and necessarily It pamphlets embraces and leaflets. These indeed weapons have been historic in liberty, the defense of pamphlets as the of Thomas Paine history and in others our own abundantly attest. The press in its comprehends historic connotation every sort publication which affords a vehicle of information and opinion. What we have had say recent occasion to with respect importance to the protecting vital this essen- liberty every tial infringement sort of need not be repeated. v. Near Minnesota. . . .” Id., at 451-452 (footnote

(emphasis original) omitted). in reasoning The particularly of Lovell, since the case was cited legislative in history, supports reading a broad publishers.50 exclusion for 50 always “It is appropriate to assume that our representatives, elected

like other citizens, know the law.” Cannon University v. Chicago, 441 that uses broad extremely language itself The exclusion or finan- publication, business newspaper, encompasses The conditions are met. that two provided cial publication and it must be “of fide,” regular “bona must be publication Neither of these conditions circulation.” and general “hit differentiate precisely the two qualifications but defined, Pre- publishers. and “touts” from genuine and run tipsters” would be genuine fide” publication a “bona sumably commentary contain disinterested it would sense by material disseminated opposed promotional analysis regu- Moreover, “general publications a “tout.” bulle- who send out “people would not include lar” circulation and sell- advisability buying time to time on the tins from “hit and 10065, 87, H. R. see stocks,” Hearings ing Ibid. Because the content of petitioners’ run tipsters.”51 disinterested, they and because was completely newsletters schedule, they on a regular to the general public offered were of the exclusion. plain language are described in SEC v. Wall relied on its opinion of Appeals Court denied, cert. (CA2), 422 F. 2d 1371 Transcript Corp., Street legislation might Moreover, areas where 677, “[i]n U. 696-697 S. Congress, has guarantees, which we believe intrude on constitutional Constitution, of funda- would err on side always protect sworn implicates those legislation its liber- liberties when mental constitutional (1984) (Stevens, J., Time, Inc., Regan v. U. S. ties.” dissenting part). concurring part testimony explained Douglas in the T. John “tipsters” is The term newspaper offer ston, through “who advertisements supra persons n. — go up.” price, that are sure to send, a nominal a list of stocks Jus imagine” any definition of the exclusion “to workable tice White is unable personally tailored to sweep publications in all that are not “that does not wrote, Congress actually clients,” at 216. The definition post, individual that are issued from time to time however, sweep not in bulletins does activity, particular that “tout” market advertisements response episodic to up” to go “that are sure to that are sold issues, lists of stocks advertised person as an incident to purchasers, publications distributed individual alized investment service.

207 (1970), 398 petitioners U. S. to hold that were not bona newspapers fide exempt registra thus not from the Act’s requirement. tion Transcript, In majority Wall Street the “phrase held newspapers that the ‘bonafide’ . . . means those publications which customary do not newspaper deviate from activities to such an extent that is a there likelihood that the wrongdoing designed prevent which Act was to has oc given curred.” It publication reasoned that whether “a fits within depend this upon exclusion prac must the nature of its upon purely tices rather than newspa formal ‘indiciaof a per’ which it exhibits its on face and in the size and nature of subscription its list.” 422 F. 2d, at 1377. court ex pressed its concern “might an investment adviser choose present [information to guise clients] in the of traditional newspaper format.” citing Id., at 1378. The Commission, Transcript, Wall Street interpreted has the exclusion to apply “only advertising where, based the content, mate readership rial, publication other relevant factors, is primarily vehicle, distributing investment advice.”52 These various statutory language formulations recast the capturing without legislative the central thrust his tory, and mentioning apparent without even intent of Congress keep the Act free of constitutional infirmit designed ies.53 apply The Act persons to those 52Investment Advisers Act Release No. Reg. 2953, Fed. n. 1 (1977) (codified (1984)). at 17 §276 CFR The Commission’s reformulation of the definition of the exclusion was not years drafted until after 1977—37 of the passage Act —and therefore is not entitled to the deference due a contemporaneous Sloan, construction of the Act. SEC v. 436 U. S. Justice significance White attaches to the fact year first operation, Act’s publishers advisory Post, registered services under the Act. at 215. The fact that those firms advantageous deemed it register does not demonstrate that statute required them to so. do 53The Commission’s on the content publication focus to determine publisher whether a represents within the exclusion depar- dramatic investment-advisory profession who engaged in the —those concerns, a personalized to client’s provide advice attuned The mere by communication.54 or verbal written whether about comment publication advice and contains that fact personalized give character specific not it the does securities Thus, professional investment adviser. identifies purpose publications the central petitioners’ do not fit within they advice offer individualized do not Act of the because particular any portfolio any specific client’s or to attuned public contrary, they to the for sale the circulate On needs. public in which open large forum free, in a market —a at may express anyone typically his views. literally, language seems read exclusion, the

The “publish petitioners’ are Petitioners newsletters. describe magazine newspaper, or business news bona fide ers might argu publication.” modifier that or financial ably disqualify “bona fide.” the words are newsletters publication Notably, describe those words however, publisher; un hence Lowe’s of the the character rather than being history prevent savory his newsletters does history, phrase light legislative this In fide.” “bona publications petitioners’ “genuine”; meet best to translates as content is itself. far in the statute As objective criteria from the ture every broadly encompasses “business concerned, statutory exclusion by requirement that it category then limits the publication” but financial regular general and that it be “of fide,” requirement and a further be “bona explain meaning attempt makes no White circulation.” Justice but, instead, merely empha- 215-216, post, at requirements, of these either adviser, post, of an investment the basic definition sizes breadth encompass publishers. admittedly enough to is 216-219, broad which the exclusion together read must However, basic definition words, line; in other drew place Congress where in order to locate Congress used the statute. every word that give must effect to we “clients,” not “sub repeatedly refers the Act significant It 80b-3(b)(2), 80b-3(b)(l), §§80b-l(l), See, g., C. e. 15 U. S. scribers.” 80b-6(3). 80b-6(2), 80b-6(l), 80b-3(c)(l)(E), 80b-3(b)(3), this definition: they are published those engaged in solely the publishing and business are not personal communictions in the masquerading of clothing newspapers, news maga zines, or financial publications. Moreover, there is no sug that gestion they contained false or any misleading informa or tion, that were they designed to tout in any which security petitioners had an interest. Further, petitioners’ publica tions are “of general and regular circulation.”55 Although the publications have not been in “regular” the sense of consistent circulation, publications have been in “regular” the sense important to the securities market: is there no indi cation that have they been timed to specific market activity, or to events or affecting having ability affect securities industry.56 relies on the testimony of witness James White to

55 Justice White support interpretation his legislative of the history. Post, at 219-220. However, significantly, White stated that the term “investment adviser” “people includes who send out bulletins time to time on the advis ability buying or selling stocks.” people Such would not fit within the exclusion for publications bona fide of regular general and circulation. Tipsters who send out bulletins from time to time on advisability buying selling or stocks presumably satisfy would not the requirement of “general regular circulation” and would fall within the basic definition Thus, investment adviser. agree we do not with Justice White’s as sumption petitioners that equated should be with distributors of “tout sheets,” post, at n. 3. Additionally, extremely it is any that doubtful “tipsheet” “tout e., sheet” fide,” could be a “bona genuine, i. publication so as to claim the benefits of the exclusion. actually Without determining how exception “supposed to mesh” definition, with the post, basic and without consideration of the “general regular” publication requirement, Justice White would adopt an extremely narrow, content-based, interpretation of the exclusion in preserve order to ability Commission’s practice deal with the “scalping,” post, at practice is, 224. That course, dangerous most when engaged in publication with large perhaps by a colum circulation — nist in an admittedly exempt publication. Zweig Corp., Cf. v. Hearst (CA9 1979). F. 2d 1261 Moreover, it is incorrect to assume that the remedies against scalping found in are the Act. The mail-fraud statute fraud, overreaching deception, dangers are present person of the statute the enactment motivated not replicated publications but are alized communications market.57 To the in an open and sold that are advertised factual information service contains the chart extent and the newslet trends, and market transactions about past there conditions, market commentary general ters contain character of the comm the protected no doubt about can be when Congress matter that concerned unications,58 The content publications was drafted. exclusion reveal are directed this case they to which the audience As as the com long of the exclusion. limits specific re and their subscribers munications between petitioners into the kind of and do not develop main entirely impersonal that were discussed relationships fiduciary, person-to-person that are of the Act and history in the legislative at length we adviser-client relationships, of investment characteristic at least within are, presumptively, believe the publications under the thus not subject registration the exclusion and Act.59 violations, recently many has certainly SEC

would be available SEC publisher. using against § a newsletter See had success Rule 10b-5 (CA6 (ED Blavin, 1983), aff’d, 760 F. 2d 706 Supp. 1304 Mich. v. 557 F. 1985). 57 Bar Assn., 447 It is v. Ohio State 436 U. S. Cf. Ohralik petitioners have has not established that significant that the Commission subscribers; petitioners that have been authority over the funds of had authority portfolios or decisionmaking to handle subscribers’ delegated individualized, inter investment-related accounts; or that there have been petitioners and subscribers. actions between opin expression of Moreover, squarely held that the we have because protected loudspeaker as a product such ion about a commercial S., Inc., U. Corp. Bose v. Consumers Union Amendment, First opinion why expression of an (1984), difficult to see it is U. S. protected. security should not also be about a marketable may regularly that an investment adviser suggests 59 TheCommission recent form, to several clients based on advice provide, in newsletter tailoring the advice to each client’s individual developments, without We therefore petitioners’ conclude publications that fall statutory within the publications exclusion for bona fide petitioners none of is an “investment adviser” as defined in the Act. It followsthat unregistered neither their status, nor the barring Commission order Lowe from asso- ciating with an provides investment adviser, justification for restraining publication the future of their newsletters. It also follows that we specifically need not address the con- question granted stitutional we certiorari to decide. judgment Appeals Court of is reversed.

It is so ordered. part took no Justice in the decision of this case. Powell Justice White, with whom The Chief Justice Rehnquist Justice join, concurring the result.

The issue in this case is whether the Securities and Exchange may Commission injunctive invoke the remedies of the Investment Advisers §§ Act, 15 U. C.S. 80b—1 to prevent 80b-21, unregistered an adviser publishing containing newsletters investment advice specifi- that is not cally tailored to the needs of individual clients. The Court holds it not because the petitioner activities of (hereafter petitioner) Lowe do not make him an by adviser covered the Act. For the reasons that I follow, disagree improvident with this construction of the statute. my petitioner In view, is an subject investment adviser to regulation and sanction under the Act. I judg- concur in the ment, prevent however, petitioner because to publish- ing at all is inconsistent with the First Amendment. needs, and that this practice is the of investment advising. Brief for Respondent 34, n. 44. However, the Commission does suggest not “practice” this is here; thus, involved we have no occasion to address this concern.

I principle ad quarrel that constitutional AI haveno fairly possible do so judication where it is avoided is be respect Congress. negating Due for the intent without power requires Legislative exercise our that we Branch sparingly. reason, For this its enactments to strike down Congress validity is drawn “[w]hen an act of constitutionality is question, if a serious doubt and even principle will first as that this Court it is a cardinal raised, fairly possible is the statute a construction of whether certain may Benson, v. question be avoided.” Crowell which (1932). 285 U. S. through questions duty to avoid constitutional

But our subject statutory to the unlimited: it is is not construction “fairly possible.” adopted be that the construction condition may not be sub warned, “amendment Taft As Chief Justice may exercise ... a court construction, and stituted con legislative the law from conflict with to save functions Cong Eng Trinidad, 271 Yu v. U. S. limitation.” stitutional opinion concurring whose Brandeis, Justice (1936), is TVA, 288, 341-356 v. 297 U. S. in Ashwander the rule of frequently statement of cited as the definitive “The court himself cautioned: avoidance,” “constitutional holding may unconstitutional, a statute in order to avoid not, provision. exception upon . engraft other . . Neither it an having may resolve a constitutional it do so to avoid (dissenting supra, Benson, at 76-77 v. doubt.” Crowell opinion). Adoption particular avoid a construction to of a appropri ruling, stated, Brandéis Justice constitutional susceptible equally of two con “where a statute ate clearly it is valid and under under one of which structions, at 76. S., unconstitutional.” U. of which it other power avoid constitutional issues on our These limits principle through statutory flow from the same construction policy is, avoidance itself: that of constitutional as does the principle legislature’s deference to the exercise of its assigned role in our system. constitutional See Rescue Army Municipal v. Court, 331 U. S. 549, defining objectives task of public policy weighing the relative merits of reaching alternative means of those objectives belongs legislature. to the The courts should not lightly upon take it themselves path to state that the chosen by Congress impermissible is an one; but neither are the courts free statutory to redraft ways schemes not antici- pated by Congress solely to avoid constitutional difficulties. may The latter course at times be a imposition more drastic legislative authority than the former. When the choice facing a court is finding particular between application of a statute adopting unconstitutional and a construction of the difficulty statute that avoids the but the same time materi- ally legislative deviates plan from the permis- and frustrates applications, sible adjudication choice constitutional may preferable. bewell guidelines With these I turn mind, to consideration of proper construction of the statute at hand.

B The Investment Advisers Act of 1940, 54 Stat. 847, as §80b-l amended, U. S. seq., C. provides et persons doing (with business as “investment advisers” must certain exceptions) register §80b-3(a). with the SEC. The Act sets grounds forth substantive for the denial or revocation of an registration. 80b-3(e). § adviser’s It is un- lawful for an registered adviser who has reg- whose istration has suspended, been revoked, practice denied to his if trade; he does subject so, he penal- to criminal ties, §80b-9(e). injunction, §80b-17, or In addition to penalizing those who would offer investment advice without registering, provisions the Act applicable contains to all in- vestment among registered advisers, whether or not. Most notable prohibitions

these are on certain contracts between recordkeeping re- §80b-5, see clients, their advisers it unlawful provisions that make §80b-4, and see quirements, manipula- deceptive, or engage “fraudulent, advisers for § see 80b-6. conduct, tive” publishing petitioner’s if question but is no There “in- statutory anof definition bring -within him activities (and, injunction subjects him Act adviser,” the vestment engaging in persists in penalties) heif criminal presumably, ad- “investment petitioner is an if Thus, activities. those application by the questions raised the constitutional viser,” be must conduct provisions to his enforcement the Act’s of faced. itself: the definition point, must be starting then,

The “ any person com- who, for means adviser’ 'Investment advising others, of engages in the business pensation, writings, as to publications through or directly or either advisability in- or as of securities value selling who, securities, or purchasing, or vesting in, regular issues business, part aof compensation as concerning reports securi- analyses or promulgates or (D) publisher of . . . include ties; but does or magazine business or newspaper, news fide bona regular circulation.” general and publication of financial §80b-2(a)(ll). S. C. 15 U. his subscribers petitioner not offer

Although does en- needs and individual to their specifically tailored advice undeniably them, he communications gages no direct through advising . . . others “engages in the business and “issues securities” value to the as publications ... concerning reports securities.” analyses promulgates ad- an “investment definition outside falls he Thus, qualifies fide a “bona publications his if each viser” publica- or financial magazine or business newspaper, news question is regular circulation.” general and tion exception con- tois publications” fide “bona whether broadly strued persons so toas exclude from the definition all advisory solely through whose activities are carried out publications offering impersonal investment advice to their subscribers. hardly crystal

It is clear from the face of the statute how primary publications” excep- definition and the “bona fide supposed are tion but mesh, the SEC since has, the Act’s inception, interpreted statutory definition of “investment persons adviser” to cover whose activities are limited to the publication advisory reports investment newsletters or published by petitioner. such as those At the conclusion of year operation, the Act’s reported first the Commission approximately persons that of the registering 750 and firms the Act, under “165 firms indicated that their investment advisory only pub- service consisted of the sale of uniform Report lications.” Annual Seventh of the Securities and Exchange Commission, Fiscal Year Ended June 30, 1941, (1942).1 p. appears 35 that time, Since it that the Commis- consistently routinely applied pub- sion has the Act to the offering g., lishers newsletters investment advice. See, e. Capital v. Bureau, Inc., SEC Gains Research 375 U. 180 S. (1963); (1960); Todd, In re 40 E.S. C. 303 see also Lovitch, The Investment Advisers Act of 1940—Who Is an “Invest- (1975).2 ment 24 Adviser”?, Kan. L. Rev. 67 The SEC’s 1 argues The Court significance, that this fact is proves without only as it publishers it found to be to their advantage register. own But the SEC’s matter-of-fact publishers announcement of the number of register ing under the Act something establishes beginning, else: from the the SEC applied publishers. assumed the Act to such 2 1963, In explained the Commission its coverage view of the Act follows: “The investment required advisers who are register with the Commis- (or individuals) sion under the Investment Advisers Act are certain firms engaged in the advising business of others for a fee on the value of the desirability securities or the buying selling securities. For the most part they fall into groups: one of two publishing advisory Those services periodic reports subscribers, market for offering supervision and those 216 offering publishers position of newsletters

longstanding purposes of for advisers are investment advice publications” fide the “bona a construction Act reflects content, on the “applicable where, based exception as factors, readership, relevant advertising and other material, distributing in primarily a vehicle publication is Act Applicability Advisers of Investment advice.” vestment 42 Fed. IA-563, No. Release Publications, SEC to Certain (1984); §276 (1977), cf. SEC Reg. 17 CFR codified 2953 (CA7 1984); v. Street Wall SEC F. 2d Suter, 732 v. (CA2), denied, cert. Corp., Transcript 422 F. 2d 1371 (1970). U. S. charged legislation that it is agency’s construction

An weight, particularly enforcing to substantial is entitled with contemporaneous the enact- the construction when Co., 323 S.U. v. & See Skidmore ment of statute. Swift (1944). policy of constitutional In where cases 134, the administrative however, considered, avoidance must Clark, States v. United decisive. See cannot be construction turn therefore, must, n. 10 We 445 U. S. meaning to guides the statute determine to the to other is available the statute construction a reasonable whether by category petitioner from the excluded can be which thereby issues the constitutional advisers investment avoided. publications” expands fide

Any the “bona that construction poses however, beyond SEC, exception set the bounds expanded exception include is to great If the difficulties. primarily just publications vehicles are not that more than imagine any to distributing it is difficult advice, investment publications sweep in all not that does definition workable In- clients. personally tailored individual are not that precisely the Court appears the definition this is that it deed, Study of Securities Report Special portfolios.” clients’ of individual Commission, No. H. R. Exchange Doc. Markets Securities (1963). Sess., 1, p. 146 pt. Cong., 1st 88th adopts.3 But such an expansive definition of the exception renders superfluous certain key passages the primary definition of an “investment adviser”: one who engages business of rendering investment advice “either directly suggests “tipsters” Court that might and “touts” qualify not under reading its publications” of the “bona fide exception either because their publications sufficiently are not regular or because their advice is not suffi ciently disinterested. suggestions Both implausible. seem As is evident from the Court’s conclusion petitioner’s publications that regu meet the larity requirement, the Court’s construction of the requirement adopts the major view of our law regular reviews on issue of publication: good in enough. Thus, tentions are if a “tipster” promised “tout” or publish his at regular intervals, recommendations more or he, less petitioner, like regularity would meet requirement. Moreover, truly “hit and run” practitioner who did not even claim an issuing intention of further —one recommendations —would not fall within the definition of an “investment adviser” he because would not be “engag[e] deemed to in the business” of advising others. See Applicability of Investment Advisers Act to Certain Publications, 1A-563, SEC Release No. Reg. Fed. (1977), codified § at 17 CFR 276 As for suggestion the Court’s that “touts” and “tipsters” might qualify exception under the if their advice was not disinterested, appears it completely unfounded: nowhere in language history of the Act suggestion is there person whether is an depends investment adviser on whether his advice is disinterested. In ad dition, in suggesting that the character the adviser’s advice determines whether he within the publications” falls “bona fide exception, the Court point, contradicts itself. At one it states that exception is based on “objective” criteria, purports and it to eschew a interpreta content-based ante, at, tion of the term “bona 207-208, fide.” See another, n. At 53. suggests publications Court that offer advice that is not disinterested ante, are not “bona 207-209, fide.” See and n. 55. It is hard to under why its prefers stand the Court reading SEC’s, content-based par ticularly given reading that the SEC’s simpler is much apply practice: publication if a primarily offering advice, device for it is not a newspaper, “bona fide” magazine, news or business or financial publication. reading, Under the Court’s the SEC would have to force the publisher to his own holdings disclose financial compare and then his rec holdings ommendations with his stock in order to determine whether his publications “bona requirement were fide.” self-defeating, This would be since the authority SEC has no under the Act to order such disclosures by anyone it already whom does not know to be an investment adviser. or pro- “issues writings” or or who through -publications Had securities.” concerning or analyses reports mulgates to exception fide publications” the “bona intended Congress the why to imagine is difficult it all publications, encompass have spo- should adviser” of “investment definition primary directly advice who rendered of those in the disjunctive ken or analyses, through publications, it rendered who those chosen have would Congress why it clear Nor is reports. that the SEC had it intended fide” “bona the adjective whether determining form of a publication the beyond look the Act of The construction exception.4 the it fell within in the term “bona fide” the use of the explication of Circuit’s Second is instructive: statute enti persons or 202(a)(ll) examples of Act a number of the lists “Section ‘investment the definition might fall broad within

ties whose activities spe in the place them customary practices would not but whose adviser’ the law established fiduciary role for which unregulated, cial, otherwise this in the context phrase newspapers, fide’ . The ‘bona . . standards. customary news from do not deviate publications which list, those means wrong likelihood that that there a such an extent activities to paper The deter prevent has occurred. designed to the Act doing which exclusion publication fits within this given or not a of whether mination upon purely than practices its rather the nature of depend upon must in the size face and it on its newspaper’ exhibits of a which formal ‘indicia Transcript Corp., subscription v. Wall Street list.” SEC nature of its denied, U. S. 958 1371, 1377, F. cert. 2d posi- support for the firm SEC’s reasoning provides Circuit’s The Second exception is differenti- publications” fide point of the “bona tion that provision investment solely primarily or publications devoted ate general or discus- more that diversified publications contain advice Act of the topics. financial The aim and business of news events sions manipulation on against fraud or investing public protection is the publication light this purpose, Viewed in part of advisers. target for is an obvious advice than vehicle for investment is more no as an publication treat entire it makes sense measures: regulatory of fraud in the itself case liability publication impose and to adviser publication hand, publisher of the other manipulation. On narrowly on the focused and is not forms of information presents diverse prac- likely engage in abusive not so advice is provision petitioner would exclude category from the of invest ment advisers because he through his publica offers advice tions thus with conflicts the statutory fundamental axiom of interpretation that a statute is to be give construed so toas effect to all language. its Dept. Connecticut Income Maintenance v. Heckler, 471 U. S. 524, 530, and n. 15 (1985);Reiter v. Corp., Sonotone 442 U. S. 330, 339

Nothing legislative in the history of supports the statute a construction of “investment adviser” that would exclude persons who offer investment through pub- advice such lications as reports. newsletters and Although there is very little discussion of significant it issue, that in hearings proposed on the legislation, representatives of both the SEC and the expressed investment advisers their view that the Act publishers would cover the of investment newsletters. David Schenker, the Chief Counsel of the SEC Study Investment Trust primary one of the architects proposed legislation, explained that the term “invest- ment advisers” as used in “encompasses the Act that broad category ranging people engaged who profes- are in the furnishing sion of impartial disinterested, advice to a certain economic population stratum of our to the other extreme, in- engaged dividuals running tipster organizations, or send- ing through the mails stock market Hearings letters.” S. 3580 before Subcommittee of the Senate Committee on Banking Currency, Cong., (1940)(here- 76th 3d Sess., 47 Hearings). after Senate In the later hearings, House James representative White, a of a Boston investment counsel firm tices. Thus, logical isit publication treat itself as a publi- “bona fide cation” and to exempt publisher its from classification as an investment adviser. Individual writers who make it their business to offer invest- ment advice to publication’s on regular readers basis, however, still be covered. Lovitch, See The Investment Advisers Act of 1940— Who Is an “Investment Adviser”?, 24 Kan. L. 67, 94, (1975) Rev. n. 222 (noting SEC position staff’s that columnists who offer investment advice in exempt publications are advisers). cooperated who industry spokesmen among who was bill, of the drafting of the later stages the SEC defini- statutory the scope view of same expressed out who send people term includes “the in final form: tion its of advisability buying time on the time to bulletins from stocks, and goes cheap on tips even giving stocks, selling under- firms who and to individuals from that the way all of investments to the entire supervision constant give take to advise them even basis who on a personal their clients of essentially matters which financial and other matters on tax on Hearings choice of investments.”5 of not a question are of the House Committee a R. 10065 before Subcommittee H. Sess., 3d Commerce, Cong., 76th Foreign Interstate ex- testimony, specifically his White Later advice whose that persons Boren Representative plained not excepted were solely through publications was furnished Act. defined advisers as of investment the class from made statement Mr. was correctly points that Schenker’s out The Court final exception its form publications” fide the “bona before of the hearings of the Subcommittee in the record the inclusion before raise publishers might suggested that report that Illinois regulation acknowledge that neglects to The Court problems. First Amendment report to the of the postdated the submission both statement Mr. White’s its final the Act’s definition to and the amendment Senate Subcommittee of the bill the drafters a indication that plain is statement form. White’s hearings: inception of the Senate position their since changed had not the Act. to be within still viewed publishers were scope the ex- interpretation of the its suggests that The Court also “send out persons who statement that with White’s ception is consistent advice are investment offering investment time to time” bulletins “regu- not meet the suggests, would persons, Court advisers. Such exception. But the publications” fide of the “bona larity” requirement argument: this requirement belies construction Court’s own loose sends out person who himself, best, described as can be petitioner publications petitioner’s timeliness time.” If the time to bulletins “from imagine it hard to requirement, regularity Act’s meet the is sufficient to qualify. publisher who could id., See at 90-91.6 And although House and Senate Re- ports are in the main silent on the question of the extent which advisers operating solely through publications are gov- erned by Act, the Senate Report does at least make clear personal relationship between adviser and client is not a sine qua non of an investment adviser under the statute: the Report states that the Act “recognizes that with respect to a certain class investment advisers, a type person- alized relationship may exist with their clients.” S. Rep. No. 1775, 76th Cong., 3d (1940) Sess., added).7 (emphasis 6The argues Court my interpretation of the exchange between Boren and White is incorrect. I am at a loss to understand this conten my tion. mind, To the colloquy, reprinted Court, unambiguously supports my reading. Representative Boren asked Mr. White why per sons dispensed who investment advice through publications should be ex cluded from the category of investment advisers. White answered the question by pointing out that premise its was incorrect: Boren reading was the wrong definition. The implication clear was that the correct definition did include publishers, such and Boren’s last remark —"that clarifies it for me” —indicates that he took point. 7In reaching the opposite conclusion, the Court on relies a hodgepodge of materials that are either completely irrelevant or reflect approaches that explicitly were rejected by the framers of the statute. example, For correctly Court notes that Report the SEC that large inwas measure the impetus for the Investment Advisers Act restricted its attention to “investment is, counsel” —that investment advisers maintaining personal relationship with individual clients. See Investment Trusts and Invest ment Companies, Report of the Securities and Exchange Commission, Pur suant to Section 30 of the Utility Public Holding Company Act of Counsel, Investment Investment Management, Investment Supervisory, and Investment Advisory Services, H. R. Doc. No. 76th Cong., 2d Sess. But imputing the narrow focus of the Report to the Act itself would be a mistake, serious for the Act explicitly covers investment advisers who cannot be described as “investment counsel.” This is evi 208(c) § dent from Act, of the provides which that no investment adviser may hold himself out as “investment counsel” unless “a part substantial of his . . . business consists rendering of investment supervisory serv ices”—“investment supervisory being services” 202(a)(13) by § defined of asAct “the giving of continuous advice as to the investment of funds history legislative to subsequent the Act testifies of legislation continuing it has enacted Congress’ that the belief per- as well as applies publishers investment advice could not client.” The Act needs of each individual ón the basis Act are under the “investment advisers” all “investment clearer: not be “investment counsel” careful distinction between Act’s counsel.” The leaves no subject provisions to its doubt advisers the other investment engaged per- not it to cover advisers the Act intended framers this counsel.” For counseling well as “investment investment sonal Report’s focus “invest- that the SEC reason, by no means be it can said scope the Act. limits the counsel” ment industry repre- self-serving statements reliance on the The Court’s relationships with personal importance their regarding the sentatives abundantly that the First, clear it similarly misplaced. clients is their were not Subcommittee before Senate who testified investment counsel relationships clients with their personal only advisers suggesting that with Rather, import of their from it. by the Act —far should covered personal who had counsel” reputable “investment was that statements regulation federal require clients did fiduciary relationship with their unani- (unlike these investment counselors tipsters” whom “touts reviled). mously counsel” “investment primary problem these Second, appears it that the con- require them to disclose it would Act their fear that had with the concern was with This dealt their clients. fidential communications 210(c), provides “[n]o § which Act of through the into the insertion authorize require, or to construed subchapter shall be provision of this rendering engaged adviser require any investment the Commission investments, or identity, supervisory to disclose the services adviser, except insofar as such such investment client of affairs particular proceeding in a necessary appropriate may be disclosure pro- or provision of a the enforcement investigation having object as its 80b-10(c). in § The C. references subchapter.” 15 U. S. visions of this to ... [that] “care has been taken Reports to the House and Senate the clients,” and their relationship investment advisers respect this between confidentiality ante, obviously provision to this refer see at may claim advisers who restricting the of investment provision class the to adviser-client Reports’ The references counsel.” the title “investment limited its definition suggest that the Act by no means relationships thus In- services. personalized to those who offered advisers” of “investment engaged in 210(c) advisers Act, referring in to “investment deed, § the is, giving of con- “the supervisory services” —that rendering investment sons who offer personal investment In counseling. Congress substantially the expanded penalties available to the Commission for use against unregistered advisers and advisers in engaged fraudulent or manipulative activities. Pub. L. 86-750, 74 Stat. In 885. the describing scope the the legislation, Senate Report explained “[t]hose defined as investment advisers by range act from invest- ment counsel firms, brokers whose advice is not incidental to their business, publishing houses not general financial circulation, tout sheets and others.” S. Rep. No. 1760, 86th (1960) 2d Cong., Sess., 2 added). (emphasis In 1970, Con- tinuous advice as to the investment funds on the basis of the individual needs of each quite client” —makes clear persons that some defined as “in- vestment advisers” under the Act not offer personalized do such services. The also in relying Court errs on the reprinted Illinois report in the Sen- ate Hearings authority for the notion that Congress intended exclude publishers all from the definition of “investment in adviser” order to avoid ante, constitutional difficulties. See report 197-199. This cannot bear the weight the places Court on it. The in report discussion —buried placed document into record after hearings weeks of —contains legislative mention history of the potential Act of the First Amendment by difficulties raised including publications within the cate- gory of investment advisers. significant Still more rejection is the definite of the report’s recommended solution to the First Amendment problem by the drafters of the Act. report’s The any recommendation was that legislation regulating “investment “carefully counselors” should defin[e] the term ‘investment counselor’ so as person to exclude ‘any organization or which engages in the business of furnishing analysis, opinion, or solely through publications advice to a distributed list of subscribers and not furnishing specific advice respect client securities, persons organizations also furnishing only economic advice and not advice relating purchase to the sale Hearings, securities.’” Senate at 1009. approach, This report noted, “generally the same as that used limiting scope [SEC] report of its on investment counsel organizations.” Act, course, Ibid. did carefully per- exclude sons who through furnished advice publications expressly included —it them in its definition. Moreover, provisions the Act’s quite make it clear that the definition 202(a)(ll) of “investment §in adviser” expansive is more than the definition of “investment counsel” used study in the SEC and in 208(c) § of the Act itself. SEC, authority the enforcement expanded again gress and the Senate 1430; again, 91-547, 84 Stat. L. Pub. see Act activities “regulates that explained Report others with advising for compensation receive who those of in the busi- or who are securities in to investments respect concerning reports issuing analyses securities.” ness of added). (1969) (emphasis 91-184, p. 43 No. Rep. S. of publishers that excludes the Act

A construction “in- from the definition newsletters advisory investment lan- to the statute’s runs counter adviser” vestment construction, administrative and history, legislative guage, appar- the Act by preventing policy also frustrates but has The SEC statute. applications legitimate ently and of fraudulent the problem with been concerned long advisory publish- investment some by practices manipulative whereby “scalping,” problem with the specifically, ers — a service advisory “purchases] an associated person rec- before shortly account for his own security of a shares then long-term security that ommending rise at a profit upon the shares immediately sell[s] SEC v. the recommendation.” following price market Inc., Bureau, Capital Research Gains 375 U. S. this in 1963 that

(1963). emphasized issued study An SEC an “advisory when engaged most dangerous practice a newsletter or is, circulation” —that with a sizable service have at “could recommendation other publication —whose Report price.” a stock’s market effect on least a short-term of the Securities Markets of Securities Study of Special 1st Cong., 88th R. Doc. Commission, H. No. Exchange that study concluded SEC Sess., 1, p. pt. advi- the investment within a serious problem scalping was id., 371-373. See industry. sory supra, Inc., Capital Bureau, Research Gains we In SEC v. Advisers of the Investment provisions antifraud held an investment against publisher invoked Act could be such scalping, had engaged who advisory newsletter an required adviser could be “to make full and frank dis- practice closure of trading his of on the effect of his rec- ommendations.” Id., at 197. The Court’s construction of the publisher Act, under which petitioner a like is not an “investment adviser” subject and is therefore not to the Act’s provisions, effectively antifraud Capital overrules Gains and power the protect limits SEC’s public against the poten- tially serious form manipulation. of fraud and But there is suggestion no application that the provisions of the antifraud of require the Act to advisory publishers to dis- present close material facts would serious First Amendment difficulties. See Zauderer Disciplinary v. Coun- Office of sel, 471 (1985); U. Village 651 S. Schaumburg v. Citizens a Better Environment, 444 U. S. 620, 637-638 (1980); Schneider (1939).8 State, v. 308 U. S. 147, 164 Accordingly, the Court’s zeal to avoid the narrow constitu- presented by tional issue the adopt case it leads a construc- tion of wholly the Act unnecessarily, that, prevents what would seem to be desirable applications and constitutional of the Act—a result at odds longstanding policy our construing regulation securities broadly enactments their exemptions narrowly in order effectuate their remedial purposes. g., Tcherepnin See, e. Knight, v. 389 U. S. (1967).9 336 8Similarly, application of the Act’s reporting requirements, 15 § 80b-4, U. S. C. to investment advisers whose activities are restricted to publishing appear would not to raise serious First Amendment concerns. reporting requirements would not inhibit such speaking, advisers from and it is well settled that “[t]he Amendment does not regulation forbid . . . which ends upon no restraint expression or in evil other outlawed its purposes.” terms and Press Oklahoma Publishing Walling, Co. v. 327 (1946). 186, 193 U. S. Branzburg See Hayes, also v. (1972), 408 U. 665 S. in which we held that the press exempt is not generally applicable requirement produce that citizen evidence in response subpoena. to a 9The Court brushes significance aside the consequence by this sug gesting that alternative specifically, remedies under Rule 10b- remedies — may be available. so, This although requirement Rule 5— lan- odds with construction, at this that It ironic is in the name Act, adopted and policies history, guage, to read have does One avoidance. constitutional interpretation its to realize closely very opinion Court’s conviction thinly disguised fact based is in Act publication prohibit applied is unconstitutional the Act Indeed, Court advisers. by unregistered of newsletters in Lovell decisions Court’s it discusses hand when its tips v. Minne- and Near (1938), U. S. Griffin, v. City of reasons The Court Olson, 283 U. S. rel. ex sota forms of certain forbade which decisions, these that given not have could Congress the 76th speech, on restraints prior ad- investment for licensing a provision enact to intended activities advisory whose persons include that would visers the is that appli- implication The publishing. to limited were would publishers unregistered to penalties the Act’s cation Con- Near; and because Lovell and the principles violate see Chia duty, fiduciary existing violate an any nondisclosure 10b-5 that in some (1980), leaves the matter States, 222 445 U. S. rella United v. (ED Blavin, Supp. 1304 Mich. F. in SEC v. Court The District doubt. finding (CA6 difficulty in 1985), had little 2d 706 1983), aff’d, F. SD publishing activities the defendant’s it held that duty, for fiduciary a ad “investment of an definition the Act’s within squarely him brought clients duty to his adviser, had a he] investment [an “as viser,” and that figures the investigation of reasonable some to undertake and readers The Supp., at 1314. 557 F. he them.” printed printing before he Blavin) (and not are petitioner like publishers course, that holds Court, of Investment that possibility the the excludes and thus advisers investment also duty. The Court fiduciary requisite the supply Act could Advisers fraud, but mail might constitute by publisher scalping a that hypothesizes open question. an more than aware, that is no I am as far as again, against remedy provides Act Advisers the Investment certainty that adopting a for me, persuasive reason remains, for thus scalping addition, the In petitioner. exclude that would Act of the construction by reporting require supplemented Act are of the provisions antifraud By taking scalping. uncovering in the SEC to aid may be used ments places advisers, the Court category the outside petitioner uncovering deceit. tools additional reach of these beyond the him gress is assumed know the law, ante, see at 205, n. the Court concludes that it must not have intended that result. reasoning begs

This question. What we have been called on to precisely decide this case whether restraints petitioner’s publication on light are unconstitutional in such decisions as Near purporting and Lovell. While not to question, decide the statutory holding Court bases its large assumption Congress measure on already knew the answer to it when statute was enacted. The Court Congress thus attributes clairvoyance to the 76th the Solici- tor General and apparently the Second Circuit lack—that is, ability predict holdings our years constitutional declining advance of our policy reach them. If the constitutional avoidance prefer- amounts to no more than a implicitly deciding ence for questions constitutional without explaining reasoning, our consequence if adopting and the policy statutory is a disruptive leg- decision more of the islative framework than a decision the narrow constitu- presented, purposes tional issue underlying policy light have been language, ill-served. In history, purposes of the I statute, would read its of “in- definition encompass publishers vestment adviser” petitioner, like question. and turn to the constitutional In the words of Justice Cardozo:

“[Ajvoidance difficulty pressed of a will not be to the point disingenuous of evasion. Here the intention of the Congress distinctly permit is ignore revealed too to power. us to misgivings it because of mere problem as to The George must be faced and answered.” Moore Cream Ice (1933). Rose, Co. v. 289 U. S. 373, 379 I—I I—I registration Petitioner, an investment adviser whose has practice been revoked, profes- seeks to continue the of his by publishing sion containing newsletters investment advice. read as I Act the of terms with the SEC, consistent The engaging in petitioner from enjoin attempted to them, has Amend- First the question is whether The these activities. peti- prohibit toso Government permits Federal the ment advice. of publication tioner’s A gov- power of between a collision involves This issue pursue a would regulate who those to license ernment speech of rights freedom of and the vocation profession or The by Amendment. First guaranteed press of undoubtedly although “[i]t is ago long determined Court follow States every the United of right citizen of . . . choose, profession he calling, or business, lawful right exer- where its arbitrary deprivation such is no there comply con- with failure permitted because is not cise v. society.” Dent protection of imposed ... ditions (1889). Regulations 121-122 Virginia, 114, 129 U. S. West constitu- general are matter, profession, as a entry into a applicant’s they connection a rational “have if tional v. profession. Schware practice” the capacity to fitness Examiners, U. S. Bar Board professions is regulate the government power of The speech. profession entails practice of a lost whenever by the Court expressed principle underlying was S. Storage Co., 336 U. Ice Empire & Giboney v. abridgment of freedom (1949): an deemed never been has “it merely illegal conduct press course speech to make car- evidenced, or part initiated, in the conduct because spoken, written, or language, either means out ried printed.” profes- “speaking example of a

Perhaps most obvious legal licensing is the governmental subject is sion” entirely lawyer’s almost Although work profession. in viewed that, acts communicative the sort of devoted protection, we Amendment’s First fall isolation, within have never “[a] doubted that require high State can stand qualification, ards of good such as profi moral character or ciency in its law, it applicant before admits an to the bar... Schware v. supra, Bar Examiners, Board at 239. The ra for tionale such expressed by limits was Justice Frankfurter: “One does not have to self-adulatory inhale the bombast speeches after-dinner to affirm that all the interests of comprised man that are under the guaran- constitutional given tees liberty property’ ‘life, profes- are keeping lawyers. sional It is fair characterization of lawyer’s responsibility society our that he stands ‘as a quote shield,’ to Devlin, J., right defense of wrong. to ward off profession From charged responsibilities such there must quali- be exacted those truth-speaking, ties of high of a gran- sense of honor, of ite discretion, of the strictest fiduciary observance of responsibility, that throughout have, the centuries, been compendiously described as ‘moral character.’” U. at (concurring opinion). S., position The Government’s principles that these same support legitimacy regulation of its of the investment ad- visory profession, whether through publications conducted through personal relationships. client-adviser Clients trust in protection if advisers, of life and liberty, safekeeping least for the and accumulation property. Bad may investment advice be a cover for stock- manipulations designed market to bilk the client for the bene- fit of the may adviser; worse, it lead to ruinous losses for the protect client. To investors, may Government insists, it require that lawyers, investment advisers, like evince the qualities truth-speaking, honor, fiduciary discretion, and responsibility. principle

But the government that the entry restrict professions into through licensing vocations schemes has never been encompass licensing extended speech 230

per press. Collins, se or of the See Thomas v. 323 U. S. (1945); City (1938); 516 Lovell v. Griffin, 303 U. 444 S. (1939); State, v. 308 U. 147 Schneider S. Near v. Minnesota (1931); Olson, rel. ex 283 U. S. 697 Cantwell v. Connecticut, (1940);Village Schaumburg 310 U. S. 296 v. Citizens a for (1980); Environment, Better 444 Texas, U. S. 620 Jamison v. point, longer 318 U. S. 413 At some a measure is no regulation profession regulation speech a of a but a or of press; beyond point, the statute must survive the scrutiny level of demanded the First Amendment. point The Government that the location of submits at (with professional regulation which incidental effects on oth- protected expression) regulation speech erwise becomes press legislature. is a matter that should be left to the argues, Congress In this case, the Government has deter- including publishers mined that investment such advisers— petitioner Accordingly, fiduciaries for their clients. —are Congress power entry profession to limit has the into the order to ensure that those who are suitable to fulfilltheir fiduciary responsibilities may engage profession. in the accept petitioner’s

I cannot this as a sufficient answer to objection. question any given constitutional whether legislation speech merely permissible regu restrains profession lation of a is one that we ourselves must answer perform proper reviewing legisla if we are to our function of conformity tion to ensure its with the Constitution. “It is emphatically province duty judicial department say Marbury Madison, what the law is.” v. 1 Cranch (1803). Although congressional 137, 177 enactments come presumption validity, to this Court favor of their Goldberg, (1981), Congress’ see Rostker v. 453 U. 57, S. legislation characterization of its cannot be decisive of the question constitutionality rights of its where individual are (1958) Trop Dulles, issue. See v. U. S. 94-104 (plurality opinion J.); Buckley of Warren, Valeo, C. cf. v. curiam). (1976)(per Surely 14-24 U. S. it cannot be example, Congress if

said, were to declare editorial licensing writers fiduciaries for their readers establish “unqualified” scheme under which writers were forbidden to publish, powerless legis- this Court would be to hold that the lation violated It is for us, then, the First Amendment. principle by question find some which to answer the whether oper- applied petitioner the Investment Advisers Act as regulation speech professional ates as a or of conduct. problem This in is a Justice Jackson wrestled with his con- curring opinion Collins, in Thomas v. S.,U. at 544-548. are instructive: His words rough always

“[A] I distinction exists, which is think, shortly explained. more illustrated than A state practice forbid one without its license to law as a voca- stop person I think it tion, but could not an unlicensed making speech rights from a the about man or the rights right, including labor, other kind of recommending organize support that his hearers his may prohibit pursuit Likewise, views. the state the occupation medicine as an without its I do license, but publicly privately not think it it could make a crime speak urging persons reject any to follow or school thought. of medical the an So state to extent not neces- sary may regulate now to determine one who makes a soliciting business or a livelihood of funds or member- ships prohibit I for unions. But do not think it can one, making even if he is a leader, salaried labor an public meeting telling address to a of workmen, them rights urging their as he sees them and them to unite in general join specific Id., or to a union.” at 544-545. distinguishing Justice Jackson concluded that the factor speech any particular “associated] whether case was may regulate . . . with some other factor which the state so bring Id., as to within whole official control.” at 547. particular characterization case the association or “in a If may- regulation proven concluded, valid he one,” Ibid. stand. regulation point help aof to locate the where

These ideas speech begin. prohibitions profession One leaves off and pur- personally in client hand and the affairs of a takes who light judgment ports of the client on behalf to exercise properly and circumstances is individual needs of the client’s profession. engaging practice as Just viewed acceptance incidental to the are communications offer professional’s regulable called a contract, transaction profession. If speech the conduct of the is incidental to licensing provisions generally applicable government enacts may practice profession, limiting persons who the class of on freedom of said to have enacted limitation it cannot be scrutiny.10 subject speech press to First Amendment or the professional personal and client nexus between Where the speaker purport to exer- does not be exist, does not judgment any particular cising individual with on behalf of government directly acquainted, he is whose circumstances regulation legitimate regulation pro- function as of ceases to impact speech; practice incidental on it fessional subject regulation speaking publishing as such, of becomes “Congress command that shall to the First Amendment’s abridging speech, or of the no . . . the freedom of make press.”11 law impose course, government might possible it is that conditions Of violate the First entry profession into a would some cases themselves appli example, denial of a license on the basis of Amendment. For past consti political he had made in the could cant’s beliefs or statements case, problem However, in such a a First Amendment violation. tute entry impermissible government to restrict not that it was would profession nature of the itself. profession because of the into (1931) Olson, 697, 720 ex rel. Near v. Minnesota 283 U. S. 11 See business, as a nui publication and the business (“Characterizing the immunity against sance, permit an invasion of the constitutional does not restraint”). applied entry profession providing As to limit into the investment advice tailored to the individual needs of each subject client, then, the Investment Advisers Act is not scrutiny regulation speech justified as a can be as a —it legitimate power exercise of the to license those who would practice profession, subject and it is no more to constitu- state-imposed tional attack than limits on those who practice professions applica- of law and medicine. The provisions prevent unreg- tion of the Act’s enforcement persons engaging publishing istered in the business of purchase investment advice for the benefit of who would publications, their is a however, direct restraint on freedom speech press subject searching scrutiny and of the to the called for the First Amendment.

B recognition prohibition publishing that the on the by persons registered investment advice under the Act speech inquiry. is a restraint on does not end the Not all speech impermissible. restrictions on are The Government statutory petitioner’s contends that if even the restraints on publishing speech activities are deemed to be restraints on regulations entry profession, peti- rather than mere into a speech “expression solely tioner’s related to the economic speaker interests of the and its Hudson audience,” Central Corp. Gas & Electric v. Public Service New Comrn’n (1980), subject York, 447 U. S. and is therefore protection to the reduced afforded what we have come to speech.” describe as “commercial Zauderer v. See Office Disciplinary Counsel, 471 626 U. S. Under speech doctrine, commercial restrictions on commercial speech directly governmental that a in- advance substantial may upheld. prohibition id., terest on be See at 638. The petitioner’s publishing suggests, activities, the Government permissible directly restriction, is such goal as it advances the protecting investing public against unscrupulous advisers.

234 argues echoing that below, the dissent

Petitioner, expression not commercial in his newsletters is contained propose speech, transaction a commercial as it does Virginia speaker Phar- and his audience. See between the Virginia macy Council, Inc., v. Citizens Consumer Board (1976). Although petitioner that concedes 425 U. S. subjects, argues speech it is he relates to economic his fully protected stripped of its status as not for that reason speech. Collins, 323 at 531. Accord- S., Thomas v. U. See upheld prohibition speech ingly, argues, can on his he pre- regulation “only government is a if can show that the serving compelling cisely interest.” means of state drawn New v. Public Service Comm’n Edison Co. Consolidated York, 447 U. S. necessary the resolution of this case I it is to do not believe fully petitioner’s contain newsletters to determine whether protected speech speech. purports commercial The Act or petitioner publish it unlawful for to newsletters to make injunction containing advice and to authorize an legiti- against publication. The ban extends as well such as to advice that is fraudulent, advice mate, disinterested prior manipulative. prohibition deceptive, a flat Such fully protected speech, speech applied is, restraint on presumptively invalid and be sustained under extraordinary Times See New York most circumstances. (1971); States, v. v. 403 U. S. Schneider Co. United (1939); Olson, Minnesota ex rel. State, 308 Near v. U. S. (1931). I do not understand the 283 U. S. 697 Government argue justify a restraint that the circumstances would fully speech remotely present protected in this case. are speech” concerned, “commercial But even where mere speech only permits restraints on the First Amendment legitimate narrowly they tailored to advance when are certainly legiti- governmental interest. The interest here is prevent from fall- investors mate: the Government wants ing swindlers. The means the hands of scoundrels and into petitioner’s past

chosen, is however, extreme. Based on may misconduct, the Government fears that he in the future publish misleading; that is advice fraudulent or and it there prevent publishing fore seeks him from advice, regardless actually objectionable. of whether it is Our com speech consistently rejected mercial proposi cases have prohibitions speech tion may justified that such drastic on by possibility prohibited speech a mere that the will be fraud supra; ulent. Zauderer, See J., In re R. M. U. S. (1982); Bates v. State Bar Arizona, 433 U. S. 350 plausibly So also here. It cannot be maintained that person background investment advice from a whose indicates inherently misleading that he is deceptive,12 unreliable is nor I am outright convinced that less drastic remedies than (for suppression example, application of the Act’s antifraud provisions) are not available to achieve the Government’s purpose protecting asserted Accordingly, investors. I applied prevent petitioner would hold that Act, publishing altogether, investment advice is too blunt an in strument scrutiny to survive even the reduced level of called by speech. restrictions on commercial The Court’s ob supra, servation in applicable State, Schneider v. here as well: may punished

“Frauds be denounced as offenses and law. ... If it is said that these means are less efficient power police and convenient than bestowal of authori- ties to decide what information be disseminated . . . may impart and who the information, the answer is that empower [government] considerations of this sort do not abridge speech press.” freedom of 12 Near Olson, v. Minnesota ex supra, rel. Cf. in which the Court held previous publication defamatory unprotected speech— material — justify prior could not restraint limited publication to further of defama tory Here, petitioner’s matter. the ban on publishing future activities (that nondeceptive is, extends to protected) as well speech. as fraudulent

I I I basis of the constitutional emphasize the narrowness I defining infirmity I no see this case. I decide would which publisher like to include adviser” by “investment the term application foreclose no means petitioner, I would provisions reporting example, or Act’s antifraud for of, unregistered) offer (registered who advisers to investment sug- publications. I intend to through doNor advice their provisions Act’s to invoke gest it is unconstitutional unreg- against penalties injunctive relief criminal personal compensation, invest- offer persons who, for istered only that the I hold would clients. individual advice to ment persons applied prevent constitutionally Act registration (including persons whose unregistered are who revoked) offering impersonal invest- from denied been has publications through as the such newsletters advice ment published by petitioner. holding, Court’s unlike the

Although this constitutional treating holding, statutory the SEC foreclose would not purposes, for some petitioner adviser” an “investment judgment Court of of the require reversal it would in the result. Appeals. I concur therefore

Case Details

Case Name: Lowe v. Securities & Exchange Commission

Court Name: Supreme Court of the United States

Date Published: Jun 10, 1985

Citation: 472 U.S. 181

Docket Number: 83-1911

Court Abbreviation: SCOTUS