Lowe v. Securities Exchange Commission
Decided on June 10, 1985; 472 US 181


I. ISSUES II. CASE SUMMARY III. AMICI CURIAE IV. DECISION V. WIN OR LOSS?
I. ISSUES:

A. Issues Discussed:  1st Amendment (press, speech, association)

B. Legal Question Presented: 

Should Petitioners be permanently banned from publishing non-personalized investment advice and commentary in securities newsletters because they are not registered as investment advisers under § 203(c) of the Investment Advisers Act of 1940?
II. CASE SUMMARY:

A. Background:

Lowe, the former president of Lowe Management Corporation, was convicted of misappropriating funds of an investment client, engaging in business as an investment adviser without registering, tampering with evidence to cover up fraud of an investment client, and stealing from a bank. Consequently, the Securities and Exchange Commission (SEC) ordered that the corporation's registration be revoked and that Lowe not associate with any investment adviser.

A year later, the SEC commenced an action alleging that Lowe, the Lowe Management Corporation, and two other corporations (Petitioners), violated the Investment Advisers Act of 1940 (the Act), and that Lowe was violating the SEC's order. According to the SEC, Lowe and the three corporations were publishing two investment newsletters and soliciting subscriptions for a stock-chart service.  Through these publications, the petitioners were engaged in the business of advising others “as to the advisability of investing in, purchasing, or selling securities... and as a part of a regular business... issuing reports concerning securities.”

After determining that petitioners' publications were protected by the First Amendment, the District Court, denying for the most part the SEC's requested injunctive relief, held that the Act must be construed to allow a publisher who is willing to comply with the Act's reporting and disclosure requirements to register for the limited purpose of publishing such material and to engage in such publishing.

The Court of Appeals reversed, holding that the Act does not distinguish between person-to-person advice and impersonal advice given in publications, that petitioners were engaged in business as "investment advisers" within the meaning of the Act, and that the exclusion in 202(a)(11)(D) of the Act from the Act's definition of covered "investment advisers" for "the publisher of any bona fide newspaper, news magazine, or business or financial publication of general and regular circulation" did not apply to petitioners. Rejecting petitioners' constitutional claim, the court further held that Lowe's history of criminal conduct justified the characterization of petitioners' publications "as potentially deceptive commercial speech."

The United States Supreme Court granted certiorari to the Unites States Court of Appeals for the Second Circuit to review the case again. 
B. Counsel of Record:
ACLU Side
(Respondent/Appellee)
Opposing Side
(Petitioner/Appellant)
Solicitor General Lee argued the cause for respondent. With him on the brief were Deputy Solicitor General Claiborne, Daniel L. Goelzer, Paul Gonson, Jacob H. Stillman, Alan Rosenblat, David A. Sirignano, and Gerard S. Citera.
Michael E. Schoeman argued the cause and filed briefs for petitioners.

C. The Arguments:

ACLU Side
(Respondent/Appellee)
Opposing Side
 
(Petitioner/Appellant)
Unavailable  Unavailable
III. AMICI CURIAE:
ACLU Side
(Respondent/Appellee)
Opposing Side
(Petitioner/Appellant)
Michael R. Klein filed a brief for the American Civil Liberties Union as amicus curiae urging affirmance.

Harry F. Tepker, Jr., filed a brief for the North American Securities Administrators Association, Inc., as amicus curiae.
Briefs of amici curiae urging reversal were filed for the American Federation of Labor and Congress of Industrial Organizations by Robert M. Weinberg and Laurence Gold; for the Association of American Publishers, Inc., by R. Bruce Rich; and for the Reporters Committee for Freedom of the Press, et al., by Nancy J. Bregstein, Benjamin W. Boley, and Robert J. Brinkmann.
IV. THE SUPREME COURT'S DECISION:

"The  Investment Advisers precludes individuals from engaging in the business of advising others 'as to the advisability of investing in, purchasing, or selling securities... and as a part of regular business... issuing reports concerning securities,' unless the individual is registered or exempt from registration under the Act...

The Act's legislative history demonstrates both that Congress was interested in regulating the business of rendering personalized investment advice, and that Congress was sensitive to First Amendment concerns.

None of the petitioners [qualify as an] ‘investment adviser,’ as defined in the Act. On its face, the Act’s basic definition of 'investment adviser,' applies to petitioners. The mere fact, however, that a publication contains advice and comment about specific securities does not give it the personalized character that identifies a professional investment adviser. Thus, petitioners' publications do not fit within the central purpose of the Act because they do not offer individualized advice attuned to any specific portfolio or to any client's particular needs. On the contrary, they circulate for sale to the public at large in a free, open market - a public forum in which typically anyone may express his views...

The Act excludes several categories of person including any publisher of bona fide news magazine, or business or financial publication of general and regular circulation. 'Because the content of petitioners' newsletters was completely disinterested, and because they were offered to the general public on a regular schedule, they are described by the plain language of the exclusion.' 'Petitioners' publications fall within the statutory exclusion for bona fide publications and thus not subject to registration under the Act.'

Held: Petitioners' publications fall within the statutory exclusion for bona fide publications, none of the petitioners is an 'investment adviser' as defined in the Act, and therefore neither petitioners' unregistered status nor the SEC order against Lowe provides a justification for restraining the future publication of their newsletters."
Justice Vote: 0 Pro vs. 8 Con

  • Stevens, J. Con  (Wrote majority opinion)
  • Brennan, W. Con  (Joined the majority)
  • Marshall, T. Con  (Joined the majority)
  • Blackmun, H. Con  (Joined the majority)
  • O’Connor, S. Con  (Joined the majority)
  • White, B. Con  (Wrote concurring opinion)
  • Burger, W. Con  (Joined White’s concurrence, voted with the majority)
  • Rehnquist, W. Con  (Joined White’s concurrence, voted with the majority)
  • Powell, L. - Took no part in the decision making process
V. A WIN OR LOSS FOR THE ACLU?

The ACLU filed as amicus curiae urging affirmance. The United States Supreme Court reversed the Court of Appeals for the Second Circuit's decision by a 8-0 vote, giving the ACLU an apparent loss.