Lowe v. Sec, 472 U.S. 181 (1985)

Lowe v. Securities and Exchange Commission

No. 83-1911

Argued January 7, 1986
Decided June 10, 1985
472 U.S. 181

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE SECOND CIRCUIT

Syllabus

Petitioner Lowe is the president and principal shareholder of a corporation (also a petitioner) that was registered as an investment adviser under the Investment Advisers Act of 1940 (Act). Because Lowe was convicted of various offenses involving investments, the Securities and Exchange Commission (SEC), after a hearing, ordered that the corporation’s registration be revoked and that Lowe not associate with any investment adviser. Thereafter, the SEC brought an action in Federal District Court, alleging that Lowe, the corporation, and two other unregistered corporations (also petitioners) were violating the Act, and that Lowe was violating the SEC’s order by publishing, for paid subscribers, purportedly semimonthly newsletters containing investment advice and commentary. 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."

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. Pp. 190-211.

(a) The Act’s legislative history plainly demonstrates that Congress was primarily interested in regulating the business of rendering personalized investment advice, including publishing activities that are a normal incident thereto. On the other hand, Congress, plainly sensitive to First Amendment concerns, wanted to make clear that it did not seek to regulate the press through the licensing of nonpersonalized publishing activities. Pp. 203-204.

(b) 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 § 202(a)(11)(D)’s exclusion. The mere fact 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’ newsletters do not fit within the Act’s central purpose, 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 in a free, open market. Lowe’s unsavory history does not prevent the newsletters from being "bona fide" within the meaning of the exclusion. In light of the legislative history, the term "bona fide" translates best to "genuine"; petitioners’ publications meet this definition. Moreover, the publications are "of general and regular circulation." Although they have not been published on a regular semimonthly basis as advertised, and thus have not been "regular" in the sense of consistent circulation, they have been "regular" in the sense important to the securities market. Pp. 204-209.

725 F.2d 892, reversed.

STEVENS, J., delivered the opinion of the Court, in which BRENNAN, MARSHALL, BLACKMUN, and O’CONNOR, JJ., joined. WHITE, J., filed an opinion concurring in the result, in which BURGER, C.J., and REHNQUIST, J., joined, post, p. 211. POWELL, J., took no part in the decision of the case.