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35 Am. U. L. Rev. 1253 (1985-1986)
Lowe v. SEC: The First Amendment Status of Investment Advice Newsletters

handle is hein.journals/aulr35 and id is 1267 raw text is: NOTE
Congress enacted the Investment Advisers Act of 1940 (Invest-
ment Advisers Act or Act)' to protect unsophisticated investors
from unscrupulous investment advisers and to disassociate legiti-
mate investment advisers from the professional stigma created by
the fraudulent activities of their less-ethical colleagues.2 The Act
1. Pub. L. No. 76-768, 54 Stat. 789, 847 (codified as amended at 15 U.S.C. §§ 80b-1-
80b-2 (1982)).
2. See H.R. REP. No. 2639, 76th Cong., 3d Sess. 28 (1940) [hereinafter cited as HOUSE
REPORT] (declaring central purpose of Investment Advisers Act as protection of public from
fraud and misrepresentation, and protection of honest investment advisers against stigma of
activities of unscrupulous individuals), reprinted in IV FEDERAL SECURITIES LAWS, LEGISLATVE
HISTORY at 3855, 3882 (1985); accord S. REP. No. 1775, 76th Cong., 3d Sess. 21 (1940), re-
printed in IV FEDERAL SECURITIES LAWS, LEGISLATIVE HISTORY at 3830, 3850 (1983) [hereinaf-
ter cited as SENATE REPORT] (stating need to protect public from fraud and misrepresentation
and to protect bona fide investment counsel against stigma of dishonest individuals' activi-
ties). The Senate Committee on Banking and Currency also reported that:
[t]he nature of the functions of investment advisers, their increasing widespread ac-
tivities, and their potential influence on security markets and the dangerous potenti-
alities of stock market tipsters imposing upon unsophisticated investors, convinces
this committee that protection of investors requires the regulation of investment ad-
visers on a national scale.
The Investment Advisers Act was a by-product of a Securities and Exchange Commission
(SEC or Commission) survey of investment advisory services made in conjunction with a study
on investment trusts and investment companies. Id. at 3849; see also Loomis, The Securities and
Exchange Act of 1934 and the Investment Advisers Act of 1940, 28 GEO. WASH. L. REV. 214, 244-45
(1959) (discussing background of Investment Advisers Act). The SEC survey uncovered abu-
sive practices within the investment adviser industry ranging from the dissemination of fraud-
ulent tips to profit-sharing contracts. SENATE REPORT, supra at 3830, 3850-51; Loomis, supra at
In SEC v. Capital Gains Research Bureau, 375 U.S. 180 (1963), the Supreme Court traced the
origin of the Investment Advisers Act to the stock market crash of 1929 and the Great Depres-
sion that followed, with the understanding that abusive practices within the securities industry
had contributed to these economic upheavals. Id. at 186; cf. 25 SEC ANN. REP. xiii-xviii (1959)
(reviewing effect of abusive practices within securities industry on failure of stock market).
According to the Court in Capital Gains, Congress enacted a number of statutes, including the

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