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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 LOWE V SEC: THE FIRST AMENDMENT STATUS OF INVESTMENT ADVICE NEWSLETTERS INTRODUCTION 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. Id. 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 244-45. 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 1253

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