Lowe v. Securities & Exchange Commission

472 U.S. 181, 105 S. Ct. 2557, 86 L. Ed. 2d 130, 1985 U.S. LEXIS 125, 53 U.S.L.W. 4705

• Court: Supreme Court of the United States
• Decided: June 10, 1985
• Docket: 83-1911
• Status: Published

Opinions

Justice Stevens

delivered the opinion of the Court.

The question is whether petitioners may be permanently enjoined from publishing nonpersonalized 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 (Act), 54 Stat. 850, 15 U. S. C. § 80b-3(c).

Christopher Lowe is the president and principal shareholder of Lowe Management Corporation. From 1974 until 1981, the corporation was registered as an investment adviser under the Act.¹ During that period Lowe was convicted of misappropriating funds of an investment client, of engaging in business as an investment adviser without filing a registration application with New York’s Department of Law, of tampering with evidence to cover up fraud of an investment client, and of stealing from a bank.² Consequently, on May 11, 1981, the Securities and Exchange Commission (Commission), after a full hearing before an Administrative Law Judge, entered an order revoking the registration of the Lowe Management Corporation, and ordering Lowe not to associate thereafter with any investment adviser.

In fashioning its remedy, the Commission took into account the fact that petitioners “are now solely engaged in the business of publishing advisory publications.” The Commission noted that unless the registration was revoked, petitioners would be “free to engage in all aspects of the advisory business” and that even their publishing activities afforded them “opportunities for dishonesty and self-dealing.”³

A little over a year later, the Commission commenced this action by filing a complaint in the United States District Court for the Eastern District of New York, alleging that Lowe, the Lowe Management Corporation, and two other corporations,⁴ were violating the Act, and that Lowe was violating the Commission’s order. The principal charge in the complaint was that Lowe and the three corporations (petitioners) were publishing two investment newsletters and soliciting subscriptions for a stock-chart service. The complaint alleged that, through those 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.”⁵ Because none of the petitioners was registered or exempt from registration under the Act, the use of the mails in connection with the advisory business allegedly violated § 203(a) of the Act. The Commission prayed for a permanent injunction restraining the further distribution of petitioners’ investment advisory publications; for a permanent injunction enforcing compliance with the order of May 11, 1981; and for other relief.⁶

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

Subscribers who testified at the trial criticized the lack of regularity of publication,⁸ but no adverse evidence concerning the quality of the publications was offered. There was no evidence that Lowe’s criminal convictions were related to the publications;⁹ no evidence that Lowe had engaged in any trading activity in any securities that were the subject of advice or comment in the publications; and no contention that any of the information published in the advisory services had been false or materially misleading.¹⁰

For the most part, the District Court denied the Commission the relief it requested. 556 F. Supp. 1359, 1371 (EDNY 1983). The court did enjoin petitioners from giving information to their subscribers by telephone, individual letter, or in person, but it refused to enjoin them from continuing their publication activities or to require them to disgorge any of the earnings from the publications.¹¹ The District Court acknowledged that the face of the statute did not differentiate between persons whose only advisory activity is the “publication of impersonal investment suggestions, reports and analyses,” and those who rendered person-to-person advice, but concluded that constitutional considerations suggested the need for such a distinction.¹² After determining that petitioners’ publications were protected by the First Amendment, the District Court held that the Act must be construed to allow a publisher who is willing to comply with the existing reporting and disclosure requirements to register for the limited purpose of publishing such material and to engage in such publishing.¹³

A splintered panel of the Court of Appeals for the Second Circuit reversed. 725 F. 2d 892 (1984). The majority first held that petitioners were engaged in business as “investment advisers” within the meaning of the Act. It concluded that the Act does not distinguish between person-to-person advice and impersonal advice given in printed publications.¹⁴ Rather, in its view, the key statutory question was whether the exclusion in § 202(a)(ll)(D), 15 U. S. C. §80b-2(a)(ll)(D), for “the publisher of any bona fide newspaper, news magazine, or business or financial publication of general and regular circulation” applied to the petitioners. Relying on its decision in SEC v. Wall Street Transcript Corp., 422 F. 2d 1371, cert. denied, 398 U. S. 958 (1970), the Court of Appeals concluded that the exclusion was inapplicable.¹⁵

Next, the Court of Appeals rejected petitioners’ constitutional claim, reasoning that this case involves “precisely the kind of regulation of commercial activity permissible under the First Amendment.”¹⁶ Moreover, it held that Lowe’s history of criminal conduct while acting as an investment adviser justified the characterization of his publications “as potentially deceptive commercial speech.”¹⁷ The Court of Appeals reasoned that a ruling that petitioners “may not sell their views as to the purchase, sale, or holding of certain securities is no different from saying that a disbarred lawyer may not sell legal advice.”¹⁸ Finally, the court noted that its holding was limited to a prohibition against selling advice to clients about specific securities.¹⁹ Thus, the Court of Appeals apparently assumed that petitioners could continue publishing their newsletters if their content was modified to exclude any advice about specific securities.²⁰

One judge concurred separately, although acknowledging his agreement with the court’s opinion.²¹ The dissenting judge agreed that Lowe may not hold himself out as a registered investment adviser and may not engage in any fraudulent activity in connection with his publications, but concluded that the majority had authorized an invalid prior restraint on the publication of constitutionally protected speech. To avoid the constitutional question, he would have adopted the District Court’s construction of the Act.²²

I — I

We granted certiorari to consider the important constitutional question whether an injunction against the publication and distribution of petitioners’ newsletters is prohibited by the First Amendment. 469 U. S. 815 (1984).²³ Petitioners contend that such an injunction strikes at the very foundation of the freedom of the press by subjecting it to license and censorship, see, e. g., Lovell v. City of Griffin, 303 U. S. 444, 451 (1938). Brief for Petitioners 15-19. In response the Commission argues that the history of abuses in the securities industry amply justified Congress’ decision to require the registration of investment advisers, to regulate their professional activities, and, as an incident to such regulation, to prohibit unregistered and unqualified persons from engaging in that business. Brief for Respondent 10; cf. Konigsberg v. State Bar of California, 366 U. S. 36, 50-51 (1961). In reply, petitioners acknowledge that person-to-person communication in a commercial setting may be subjected to regulation that would be impermissible in a public forum, cf. Ohralik v. Ohio State Bar Assn., 436 U. S. 447, 455 (1978), but contend that the regulated class — investment advisers — may not be so broadly defined as to encompass the distribution of impersonal investment advice and commentary in a public market. Reply Brief for Petitioners 1-4.

In order to evaluate the parties’ constitutional arguments, it is obviously necessary first to understand, as precisely as possible, the extent to which the Act was intended to regulate the publication of investment advice and the reasons that motivated Congress to authorize such regulation. Moreover, in view of the fact that we should “not decide a constitutional question if there is some other ground upon which to dispose of the case,”²⁴ and the further fact that the District Court and the dissenting judge in the Court of Appeals both believed that the case should be decided on statutory grounds, a careful study of the statute may either eliminate, or narrowly limit, the constitutional question that we must confront. We therefore begin with a review of the background of the Act with a particular focus on the legislative history describing the character of the profession that Congress intended to regulate.

HH J — I

As we observed in SEC v. Capital Gains Research Bureau, Inc., the “Investment Advisers Act of 1940 was the last in a series of acts designed to eliminate certain abuses in the securities industry, abuses which were found to have contributed to the stock market crash of 1929 and the depression of the 1930’s.”²⁵ The Act had its genesis in the Public Utility Holding Company Act of 1935, which “authorized and directed” the Commission “to make a study of the functions and activities of investment trusts and investment companies . . . and to report the results of its study and its recommendations to the Congress on or before January 4, 1937.”²⁶ Pursuant to this instruction, the Commission transmitted to Congress its study on investment counsel, investment management, investment supervisory, and investment advisory services.²⁷ The Report focused on “some of the more important problems of these investment counsel organizations”;²⁸ significantly, the Report stated that it “was intended to exclude any person or organization which was engaged in the business of furnishing investment analysis, opinion, or advice solely through publications distributed to a list of subscribers and did not furnish specific advice to any client with respect to securities.”²⁹

The Report traced the history and growth of investment counsel, noting that 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 in 1929, and markedly increased in the mid-1930’s in response “to the demands of the investing public, which required supervision of its security investments after its experience during the depression years.”³¹

Regarding the functions of investment counselors, the Report stated that “[s]ome of the representatives of investment counsel firms urged that the primary function of investment counselors was ‘to render to clients, on a personal basis, competent, unbiased, and continuous advice regarding the sound management of their investments.’”³² Nevertheless, it noted that one investment counselor conceded:

“[Y]ou have a gradation from individuals who are professed tipsters and do not make any pretense of being anything else, all the way up the scale to the type of individual, who, as you say, desires to give the impartial scientific professional advice to persons who are trying to plan their economic situation in the light of accomplishing various results, making provision for old age, education, and so forth. However, you can readily see . . . that a very significant part of that problem, as far as we are concerned, and possibly the most vital one, is, shall we say, the individuals on the fringes. . . .”³³

Representatives of the industry viewed the functions of investment counselors slightly differently, concluding that they should serve “individuals and institutions with substantial funds who require continuous supervision of their investments and a program of investment to cover their entire economic needs.”³⁴ Turning to the problems of investment counselors, the Report concluded that they fell within two categories: “(a) the problem of distinguishing between bona fide investment counselors and ‘tipster’ organizations; and (b) those problems involving the organization and operation of investment counsel institutions.”³⁵

The Commission’s work “culminated in the preparation and introduction by Senator Wagner of the bill which, with some changes, became the Investment Advisers Act of 1940.”³⁶ Senator Wagner’s bill, S. 3580, contained two Titles; the first, concerning investment companies, contained a definition of “investment adviser,”³⁷ but the second, concerning investment advisers, did not. After the introduction of S. 3580, a Senate Subcommittee held lengthy hearings at which numerous statements concerning investment advisers were received.³⁸ One witness distinguishing the investment-counsel profession from investment firms and businesses, explained:

“It is a personal-service profession and depends for its success upon a close personal and confidential relationship between the investment-counsel firm and its client. It requires frequent and personal contact of a professional nature between us and our clients. . . .

“We must establish with each client a relationship of trust and confidence designed to last over a period of time because economic forces work themselves out slowly. Business and investment cycles last for years and our investment plans have to be similarly long-range. No investment counsel firm could long remain in business or be of real benefit to clients except through such long-term associations. . . .

“. . . Judgment of the client’s circumstances and of the soundness of his financial objectives and of the risks he may assume. Judgment is the root and branch of the decisions to recommend changes in a client’s security holdings. If the investment counsel profession, as we have described it, could not offer this kind of judgment with its supporting experience and information, it would not have anything to sell that could not be bought in almost any bookstore. . . .

“Furthermore, our clients are not unsophisticated in financial matters. They are resourceful men and women of means who are very critical in their examination of our performance. If they disapprove of our activities, they cancel their contracts with us, which eliminates our only source of income.

“We are quite clearly not ‘hit and run’ tipsters, nor do we deal with our clients at arms’ length through the advertising columns of the newspapers or the mails; in fact, we regard it as a major defeat if we are unable to have frequent personal contact with a client and with his associates and dependents. We do not publish for general distribution a statistical service or compendium of general economic observations or financial recommendations. To use a hackneyed phrase, our business is ‘tailor-made.’ ”³⁹

David Schenker, Chief Counsel of the Commission’s Investment Trust Study, summarized the extent of the proposed legislation: “If you have been convicted of a crime, you cannot be an investment counselor and you cannot use the mails to perpetrate a fraud,” Senate Hearings 996. Schenker provided the Subcommittee with a significant report⁴⁰ prepared by the Research Department of the Illinois Legislative Council. Ibid. Referring to possible regulation of investment counselors in the State of Illinois, the report stated in part:

“Regulatory statutes concerning investment counselors appear to exempt from their provisions those who furnish advice without remuneration or valuable consideration, apparently because it is thought impracticable to regulate such gratuitous services. Newspapers and journals generally also seem to be excluded although this is not explicitly stated in the statutes, the exemption apparently being based on general constitutional and legal principles.

“A particular problem in defining the application of a law regulating investment counselors arises from the existence of individuals and firms who furnish investment advice solely by means of publications. Insofar as such individuals and firms also render specialized advice to individual clients, they might be subject to any regulatory measure that may be adopted. The question arises, however, as to whether or not services which give the same general advice to all their clients, by means of some circular or other publication, are actually engaged in a type of investment counseling as to which regulation is feasible.

“These investment services which function through publications sent to their subscribers, rather than through individualized advice, would present several difficulties not found in regulating investment counselors generally. In the first place, the large number of agencies publishing investment facts and interpretations is well known, and a very large administrative staff would be required to enforce detailed registration. Secondly, such information is supplied both by newspapers and by specialized financial journals and services. The accepted rights of freedom of the press and due process of law might prevent any general regulation and perhaps also supervision over particular types of publications, even if the advertisements of these publications occasionally quite exaggerate the value of the factual information which is supplied. That the constitutional guarantee of liberty of the press is applicable to publications of all types, and not only to newspapers, has been clearly indicated by the United States Supreme Court [citing Lovell v. City of Griffin, 303 U. S. 444 (1938)]. . . .

“To the problem of formulating reasonable and practicable regulations for the factual services must, accordingly, be added the legal and constitutional difficulties inherent in the attempted regulation of any individual or organization functioning primarily by means of published circulars and volumes. However, liberty of the press is not an absolute right, and some types of regulation may be both constitutional and feasible, assuming that regulation of some sort is thought desirable. Such regulation could probably not legally take the form of licensing publications or prohibiting certain types of publications. Regulation of the publishing of investment advice in order to conform with constitutional requirements, would probably have to be confined to punishing, by civil or criminal penalties, those who perpetrate or attempt to perpetrate frauds or other specific acts declared to be contrary to law.

“It may be thought desirable specifically to exclude from regulation the publishers of generalized investment information, along with those who furnish economic advice generally. This may be done by carefully defining the term ‘investment counselor’ so as to exclude ‘any person or organization which engages in the business of furnishing investment analysis, opinion, or advice solely through publications distributed to a list of subscribers and not furnishing specific advice to any client with respect to securities, and also persons or organizations furnishing only economic advice and not advice relating to the purchase or sale of securities.’” 41

After the Senate Subcommittee hearings on S. 3580, and after meetings attended by representatives of investment-adviser firms, a voluntary association of investment advisers, and the Commission, a revised bill, S. 4108, was reported by the Senate Committee on Banking and Currency. In the Report accompanying the revised bill, the Committee on Banking and Currency wrote:

“Not only must the public be protected from the frauds and misrepresentations of unscrupulous tipsters and touts, but the bona fide investment adviser must be safeguarded against the stigma of the activities of these individuals. Virtually no limitations or restrictions exist with respect to the honesty and integrity of individuals who may solicit funds to be controlled, managed, and supervised. Persons who may have been convicted or enjoined by courts because of perpetration of securities fraud are able to assume the role of investment advisers.

“Title II recognizes that with respect to a certain class of investment advisers, a type of personalized relationship may exist with their clients. As a consequence, this relationship is a factor which should be considered in connection with the enforcement by the Commission of the provisions of this bill.” 42

S. 4108 was introduced before the House of Representatives as H. R. 10065.⁴³ After additional hearings,⁴⁴ the Committee on Interstate and Foreign Commerce wrote in its Report accompanying the bill:

“The essential purpose of Title II of this bill is to protect the public from the frauds and misrepresentations of unscrupulous tipsters and touts and to safeguard the honest investment adviser against the stigma of the activities of these individuals by making fraudulent practices by investment advisers unlawful. The title also recognizes the personalized character of the services of investment advisers and especial care has been taken in the drafting of the bill to respect this relationship between investment advisers and their clients.”45 (Emphasis added.)

The definition of “investment adviser” included in Title II when the Act was passed, 54 Stat. 848-849, is in all relevant respects identical to the definition before the Court today.⁴⁶

HH HH I — <

The basic definition of an investment adviser in the Act reads as follows:

“ ‘Investment adviser’ means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities. . . .”⁴⁷

Petitioners’ newsletters are distributed “for compensation and as part of a regular business” and they contain “analyses or reports concerning securities.” Thus, on its face, the basic definition applies to petitioners. The definition, however, is far from absolute. The Act excludes several categories of persons from its definition of an investment adviser, lists certain investment advisers who need not be registered, and also authorizes the Commission to exclude “such other person” as it may designate by rule or order.⁴⁸

One of the statutory exclusions is for “the publisher of any bona fide newspaper, news magazine or business or financial publication of general and regular circulation.”⁴⁹ Although neither the text of the Act nor its legislative history defines the precise scope of this exclusion, two points seem tolerably clear. Congress did not intend to exclude publications that are distributed by investment advisers as a normal part of the business of servicing their clients. The 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.

Congress was undoubtedly aware of two major First Amendment cases that this Court decided before the enactment of the Act. The first, Near v. Minnesota ex rel. Olson, 283 U. S. 697 (1931), established that “liberty of the press, and of speech, is within the liberty safeguarded by the due process clause of the Fourteenth Amendment from invasion by state action.” Id., at 707. In Near, the Court emphatically stated that the “chief purpose” of the press guarantee was “to prevent previous restraints upon publication,” id., at 713, and held that the Minnesota nuisance statute at issue in that case was unconstitutional because it authorized a prior restraint on publication.

Almost seven years later, the Court decided Lovell v. City of Griffin, 303 U. S. 444 (1938), a case that was expressly noted by the Commission during the Senate Subcommittee hearings. In striking down an ordinance prohibiting the distribution of literature within the city without a permit, the Court wrote:

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

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

The reasoning of Lovell, particularly since the case was cited in the legislative history, supports a broad reading of the exclusion for publishers.⁵⁰

The exclusion itself uses extremely broad language that encompasses any newspaper, business publication, or financial publication provided that two conditions are met. The publication must be “bona fide,” and it must be “of regular and general circulation.” Neither of these conditions is defined, but the two qualifications precisely differentiate “hit and run tipsters” and “touts” from genuine publishers. Presumably a “bona fide” publication would be genuine in the sense that it would contain disinterested commentary and analysis as opposed to promotional material disseminated by a “tout.” Moreover, publications with a “general and regular” circulation would not include “people who send out bulletins from time to time on the advisability of buying and selling stocks,” see Hearings on H. R. 10065, at 87, or “hit and run tipsters.”⁵¹ Ibid. 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.

The Court of Appeals relied on its opinion in SEC v. Wall Street Transcript Corp., 422 F. 2d 1371 (CA2), cert. denied, 398 U. S. 958 (1970), to hold that petitioners were not bona fide newspapers and thus not exempt from the Act’s registration requirement. In Wall Street Transcript, the majority held that the “phrase ‘bona fide’ newspapers . . . means those publications which do not deviate from customary newspaper activities to such an extent that there is a likelihood that the wrongdoing which the Act was designed to prevent has occurred.” It reasoned that whether “a given publication fits within this exclusion must depend upon the nature of its practices rather than upon the purely formal ‘indicia of a newspaper’ which it exhibits on its face and in the size and nature of its subscription list.” 422 F. 2d, at 1377. The court expressed its concern that an investment adviser “might choose to present [information to clients] in the guise of traditional newspaper format.” Id., at 1378. The Commission, citing Wall Street Transcript, has interpreted the exclusion to apply “only where, based on the content, advertising material, readership and other relevant factors, a publication is not primarily a vehicle, for distributing investment advice.”⁵²

These various formulations recast the statutory language without capturing the central thrust of the legislative history, and without even mentioning the apparent intent of Congress to keep the Act free of constitutional infirmities.⁵³ The Act was designed to apply to those persons engaged in the investment-advisory profession — those who provide personalized advice attuned to a client’s concerns, whether by written or verbal communication.⁵⁴ 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’ 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 language of the exclusion, read literally, seems to describe petitioners’ newsletters. Petitioners are “publishers of any bona fide newspaper, news magazine or business or financial publication.” The only modifier that might arguably disqualify the newsletters are the words “bona fide.” Notably, however, those words describe the publication rather than the character of the publisher; hence Lowe’s unsavory history does not prevent his newsletters from being “bona fide.” In light of the legislative history, this phrase translates best to “genuine”; petitioners’ publications meet this definition: they are published by those engaged solely in the publishing business and are not personal communictions masquerading in the clothing of newspapers, news magazines, or financial publications. Moreover, there is no suggestion that they contained any false or misleading information, or that they were designed to tout any security in which petitioners had an interest. Further, petitioners’ publications are “of general and regular circulation.”⁵⁵ Although the publications have not been “regular” in the sense of consistent circulation, the publications have been “regular” in the sense important to the securities market: there is no indication that they have been timed to specific market activity, or to events affecting or having the ability to affect the securities industry.⁵⁶

The dangers of fraud, deception, or overreaching that motivated the enactment of the statute are present in personalized communications but are not replicated in publications that are advertised and sold in an open market.⁵⁷ To the extent that the chart service contains factual information about past transactions and market trends, and the newsletters contain commentary on general market conditions, there can be no doubt about the protected character of the communications,⁵⁸ a matter that concerned Congress when the exclusion was drafted. The content of the publications and the audience to which they are directed in this case reveal the specific limits of the exclusion. As long as the communications between petitioners and their subscribers remain entirely impersonal and do not develop into the kind of fiduciary, person-to-person relationships that were discussed at length in the legislative history of the Act and that are characteristic of investment adviser-client relationships, we believe the publications are, at least presumptively, within the exclusion and thus not subject to registration under the Act.⁵⁹

We therefore conclude that petitioners’ publications fall within the statutory exclusion for bona fide publications and that none of the petitioners is an “investment adviser” as defined in the Act. It follows that neither their unregistered status, nor the Commission order barring Lowe from associating with an investment adviser, provides a justification for restraining the future publication of their newsletters. It also follows that we need not specifically address the constitutional question we granted certiorari to decide.

The judgment of the Court of Appeals is reversed.

It is so ordered.

Justice Powell took no part in the decision of this case.

1 In re Lowe Management Corp., [1981 Transfer Binder] CCH Fed. Sec. L. Rep. ¶ 82,873, p. 84,321.

2 Id., at 84,321-84,323.

3 The Commission wrote:

“We do not seek to punish respondents but, in light of their egregious misconduct, we must protect the public from the future harm at their hands. In evaluating the public interest requirements in this case, we have taken into account respondents’ statement that they are now solely engaged in the business of publishing advisory publications. However, respondents are still free to engage in all aspects of the advisory business. And, as the Administrative Law Judge noted, even their present activities afford numerous ‘opportunities for dishonesty and self-dealing.’

“Under all the circumstances, we are convinced that the public interest requires the revocation of registrant’s investment adviser registration, and a bar of Lowe from association with any investment adviser.” Id., at 84,324.

4 The other two corporations are the Lowe Publishing Corporation and the Lowe Stock Chart Service, Inc.

5 App. 18.

6 Id., at 28-26.

7 Id., at 32, 78-85. The Lowe Stock Advisory had only 278 paid subscribers and had published only four issues between May 1981 and its last issue in March 1982. It also analyzed and commented on the securities and bullion markets, but specialized in lower-priced stocks. Subscribers were advised that they could receive periodic letters with updated recommendations about specific securities and also could make use of the telephone hotline. 556 F. Supp. 1359, 1361 (EDNY 1983). Petitioners advertised the Lowe Chart Service as a weekly publication that would contain charts for all securities listed on the New York and American Stock Exchanges, and for the 1,200 most actively traded over-the-counter stocks, as well as charts on gold and silver prices and market indicators. Unlike the other two publications, it did not propose to offer any specific investment advice. Although there were approximately 40 subscribers, no issues were published. Ibid.; App. 32. The regular subscription rate was $325 for 3 months or $900 for 1 year.

8 Id., at 38, 42, 46, 58.

9 In addition to the 1977 and 1978 convictions that gave rise to the Commission’s 1981 order, in 1982, Lowe was convicted on two counts of theft by deception through the issuance of worthless checks. Id., at 74-76.

10 556 F. Supp., at 1361-1362.

11 The District Court also rejected the Commission’s claim that the publications were fraudulent because they did not disclose Lowe’s criminal convictions or the revocation of the registration of Lowe Management Corporation, noting that the Commission had not promulgated any rules requiring such disclosure. Id., at 1371.

12 Id., at 1365.

13 Id., at 1369. The District Court wrote: “When a publisher who has been denied registration or against whom sanctions have been invoked fully complies with the record, reporting and disclosure requirements under the Act, he must be allowed to register for the purpose of publishing and to publish.” Ibid.

14 725 F. 2d, at 896-897.

15 Id., at 898.

16 Id., at 900. The court additionally rejected petitioners’ claim that “the Act violates equal protection by subjecting investment newsletters, but not bona fide newsletters, to regulation.” Id., at 900, n. 5.

17 Id., at 901.

18 Id., at 902.

19 At the end of its opinion, the Court of Appeals wrote:

“Finally, we note what this holding does not entail. Lowe is not prohibited from publishing or stating his views as to any matter of current interest, economic or otherwise, such as the likelihood of war, the trend in interest rates, whether the next election will affect market conditions, or whether future enforcement of the Anti-Dumping Act to protect basic American smokestack industry from foreign competition is likely. He is not prohibited from publishing a newspaper of general interest and circulation. Nor is he prohibited from publishing recommendations in somebody else’s bona fide newspaper as an employee, editor, or writer. What he is prohibited from doing is selling to clients advice and counsel, analysis and reports as to the value of specific securities or as to the advisability of investing in, purchasing or selling or holding specific securities.” Ibid. It appended the following footnote:

“We leave to another day the question whether a publication dealing only with market indicators generally or making recommendations only as to groups of securities (e. g., air transport, beverages-brewers, mobile homes) could be barred on facts such as those of this case.” Id., at 902, n. 7.

20 The Court of Appeals did not explain whether its apparent unwillingness to grant the Commission all of the relief requested was based on its opinion that a modification in the content of the publication would avoid the statutory definition of “investment adviser” or on the assumption that petitioners have a constitutional right to publish newsletters omitting specific recommendations.

21 Id., at 902-908.

22 Id., at 903.

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

24 Escambia County, Florida v. McMillan, 466 U. S. 48, 51 (1984) (per curiam); see also Atkins v. Parker, ante, at 123; Ashwander v. TVA, 297 U. S. 288, 347 (1936) (Brandeis, J., concurring).

25 375 U. S. 180, 186 (1963) (footnote omitted).

26 49 Stat. 837.

27 See Investment Trusts and Investment Companies, Report of the Securities and Exchange Commission, Pursuant to Section 30 of the Public Utility Holding Company Act of 1935, Investment Counsel, Investment Management, Investment Supervisory, and Investment Advisory Services, H. R. Doc. No. 477, 76th Cong., 2d Sess. (1939) (hereinafter cited as Report).

28 Id., atlll.

29 Id., at 1.

30 Id., at 3.

31 Id., at 5. After detailing the geographic distribution, the forms, and the sizes of investment-counsel firms, the Report analyzed the affiliations of the firms. It noted that “[a]ll investment counsel firms have not restricted their business interests or activities to the supervision of the accounts of their investment clients.” Id., at 11. Of the investment-counsel firms surveyed, approximately 5% published investment manuals and periodicals; of these latter firms, 80% were without investment-company clients. Ibid. The Commission posited that affiliations with publishers of investment manuals and periodicals “may be attributable to the fact that research and statistical organizations are not uncommon with these businesses.” Id., at 12. The Report also analyzed the nature of services of investment-counsel firms to their clients:

“The powers of investment counsel firms with respect to the management of the funds of their investment company clients were either discretionary or advisory. Discretionary powers imply the vesting with an investment counsel firm control over the client’s funds, with the power to make the ultimate determination with respect to the sale and purchase of securities for the client’s portfolio. In contrast, vesting advisory powers with an investment counsel firm merely means that the firm may make recommendations to its client, with whom rests the ultimate power to accept or reject such recommendations.” Id., at 13.

Approximately one-third of the firms surveyed had discretionary powers, ibid,.; however, all firms surveyed rarely assumed “custody of the portfolio securities of their investment company clients,” id., at 15.

32 Id., at 23.

33 Id., at 25.

34 Ibid. Moreover, the representatives pointed out that there was a difference between the functions of investment counselors and investment companies:

“. . . [T]he ordinary investment trust of the management type gives its holder a diversification, probably beyond the ability of the small investor to obtain on his own capital. It also gives him management. It does not take any cognizance — the distinction is that it takes no cognizance of his total financial position in investing his money for him, and is distinguished from investment counsel, in that it gives him no judgment in the matter whatever. . . .

“Q. Now, you say the true function as you conceive it, of an investment counselor, is to give advice in connection with the specific condition of a particular individual?

“A. Yes.

“Q. While the investment trust does not have that personal element in it, that it manages the funds more on an impersonal basis?

“A. That is right.

“Q. ‘Impersonal’ being used in the sense that they may try to get a common denominator, or what they envision their stockholders’ condition may be, or what would be best for a cross-section of the American public, but does not give the advice with the peculiar, particular, specific financial condition of the individual and what he hopes to accomplish, or what purpose.

“A. Might I also add that in a number of cases at least, as Mr. Dunn said yesterday, the investment trust managers do not consider their funds as a proper repository for all of an individual’s capital. It is not that it doesn’t consider only his personal peculiarities and needs, but it does not give him a complete financial program.” Id., at 26-27 (testimony of James N. White of Seudder, Stevens & Clark) (emphasis added).

35 Id., at 27. Moreover, industry representatives “felt that investment counsel organizations could not completely perform their basic function— furnishing to clients on a personal basis competent, unbiased, and continuous advice regarding the sound management of their investments — unless all conflicts of interest between the investment counsel and the client were removed.” Id., at 28. The Report, near its conclusion, summarized:

“It was the unanimous opinion of the representatives at the public examination . . . that, although a voluntary organization would serve some salutary purpose, such an organization could not cope with the most elemental and fundamental problem of the investment counsel industry — the investment counsel ‘fringe’ which includes those incompetent and unethical individuals or organizations who represent themselves as bona fide investment counselors. These individuals and organizations not only could not meet the requirements of membership, but because of the nature of their activities would not even consider voluntarily submitting to supervision or policing.” Id., at 34.

36 SEC v. Capital Gains Research Bureau, Inc., 375 U. S., at 189.

S. 3580 contained the following definition of “investment adviser”:

“ ‘Investment adviser’ means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities; but does not include (A) a bank; (B) any lawyer, accountant, engineer, or teacher whose performance of such services is solely incidental to the practice of his profession; (C) the publisher of any bona fide newspaper or newsmagazine of general circulation; or (D) such other persons, not within the intent of this paragraph, as the Commission may designate by rules and regulations or order.” Hearings on S. 3580 before the Subcommittee on Securities and Exchange of the Senate Committee on Banking and Currency, 76th Cong., 3d Sess., pt. 1, p. 27 (1940) (Senate Hearings).

37 It is noteworthy that the exclusion for publishers in clause (C) in S. 3580 is not as broad as the exclusion in the final draft of the Act. See n. 43, infra.

38 Douglas T. Johnston, Vice President of the Investment Counsel Association of America, stated in part:

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

“Just why it is thought to be in the public interest at this time to require all the above services to register with, and be regulated by, the Federal Government we do not know.

“I have mentioned certain important exceptions or exclusions in the definition of ‘investment advisers’; one of the principal of these is lawyers. Probably in the aggregate more investment advice is given by lawyers than by all other advisers combined. I only want to point out that in so acting they are not functioning strictly as lawyers. So far as I know, no courses on investments are part of a law school curriculum, nor in passing bar examinations does a lawyer have to pass a test on investment.” Senate Hearings 711-712.

39 Id., at 713-716 (testimony of Charles M. O’Hearn) (emphasis added); see also id., at 719 (“The relationship of investment counsel to his client is essentially a personal one involving trust and confidence. The investment counselor’s sole function is to render to his client professional advice concerning the investment of his funds in a manner appropriate to that client’s needs”) (statement of Alexander Standish); id., at 724 (the “function of rendering to clients — on a personal, professional basis — competent, unbiased, and continuous advice regarding the sound management of their investments, has had a steady growth”) (statement of Dwight C. Rose, President, Investment Counsel Association of America); id., at 750 (“Investment counsel have sprung into being in response to the requirements of individuals for individual personal advice with respect to the handling of their affairs . . . the whole genesis of investment counseling is a personal professional relationship”) (testimony of Rudolf P. Berle, General Counsel, Investment Counsel Association of America).

40 It should be noted that the Illinois report was submitted by Schenker on April 26, 1940, more than three weeks after the statement quoted by Justice White, post, at 219. Contrary to Justice White’s suggestion, there is nothing in the legislative history to indicate that Congress rejected the report’s proposed distinction between advice distributed solely “to a list of subscribers” and advice to “clients.” It is undisputed that Congress broadened the scope of the “bona fide publications” exclusion after the Commission submitted the Illinois report. See n. 37, supra, and n. 43, infra.

41 Id., at 1007-1009 (emphasis added) (footnotes omitted).

⁴²

S. Rep. No. 1775, 76th Cong., 3d Sess., 21-22 (1940) (emphasis added).

43 Hearings on H. R. 10065 before a Subcommittee of the House Committee on Interstate and Foreign Commerce, 76th Cong., 3d Sess., 1 (1940). The bill contained two definitions of “investment adviser,” one in Title I (investment companies) and the other in Title II (investment advisers). The latter definition read, in part:

“ ‘Investment adviser’ means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities; but does not include . . . (D) the publisher of any bona fide newspaper, news magazine or business or financial publication of general and regular circulation. ...” Id., at 45.

Whereas the exclusion for publishers in clause (C) of the exclusion in S. 3580 only mentioned newspapers of general circulation, the exclusion in clause (D) of H. R. 10065 includes newspapers “of general and regular circulation” and also encompasses “business or financial” publications. See n. 37, supra.

44 Hearings on H. R. 10065 before a Subcommittee of the House Committee on Interstate and Foreign Commerce, 76th Cong., 3d Sess. (1940). During the hearings, testimony about the personal nature of the investment-counseling profession was again emphasized:

“When the hearings were held on this bill before the Senate committee the association opposed it. We opposed it for three general reasons: First, in the original bill there was a confusion between investment counsel and investment trusts. We felt that the personal confidential relationship existing between investment counsel and his client was so very different from the commodity of investment trust shares which investment trusts were engaged in selling, that any legislation to regulate these two different activities 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 conferences with the Securities and Exchange Commission, and all of our objections have been satisfactorily adjusted. . . .

“The Investment Counsel Association of America unqualifiedly endorses the present bill.” Id., at 92 (statement of Dwight Rose, representing Investment Counsel Association of America, New York, N. Y.).

45 H. R. Rep. No. 2639, 76th Cong., 3d Sess., 28 (1940). The terms “investment counsel,” “investment counselor,” and “investment adviser” were used interchangeably throughout the 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 of the existence of 394 investment counselors.” Senate Hearings 48. On the very next page of the hearings, he stated that “we learned of the existence of 394 investment advisers.” Id., at 49. Justice White, however, post, at 221-223, n. 7, correctly observes that the statutory definition of an “adviser” encompasses persons who would not qualify as investment counsel because they are not primarily engaged in the business of rendering “continuous advice as to the investment of funds. . . .” 15 U. S. C. § 80b — 2(a)(13) (emphasis added). But it does not follow, as Justice White seems to assume, that the term “investment adviser” includes persons who have no personal relationship at all with their customers. The repeated use of the term “client” in the statute, see n. 54, infra, contradicts the suggestion that a person who is merely a publisher of nonfraudu-lent information in a regularly scheduled periodical of general circulation has the kind of fiduciary relationship the Act was designed to regulate.

46 According to Justice White, witness James White “specifically explained to Representative Boren that persons whose advice was furnished solely through publications were not excepted from the class of investment advisers as defined in the Act.” Post, at 220 (emphasis in original). This is incorrect. Representative Boren asked a question based on his reading of the separate definition of “investment adviser” in Title I, which concerned investment companies. In response, White indicated to Boren that he was reading the wrong definition; White then quoted the basic definition of “investment adviser” from Title II, and only answered the question whether there were separate definitions under the two Titles. The relevant colloquy reads as follows:

“Mr. Boren: If I read the bill correctly, a person whose advice is furnished solely through publications distributed through subscribers in the form of publications, they are specifically exempted.

“Now, should that person be exempted who puts out a monthly or weekly newspaper, we will say, advising people on that?

“Mr. White. Will you be kind enough to give the page from which you are reading?

“Mr. Boren. Well, it is on page 154. I am reading from page 12, in the definitions of investment advisers from this other bill. It is a little different in page numbers in this bill.

“Mr. Healy. May I suggest that there is a second definition.

“Mr. White. That is an investment adviser of an investment company, which is different from an investment adviser in title II.

“Mr. Boren. I see.

“Mr. White [reading the definition from the bill]. An investment adviser in title II means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities.

“Mr. Boren. Then there is a distinct separation of investment advisers under the two different sections of the bill.

“Mr. White. Yes.

“Mr. Boren. Then that- clarifies it for me, Mr. Chairman. I thank you.

“Mr. Cole. I believe that is all, Mr. White. Thank you.

“Mr. White. Thank you.” Hearings on H. R. 10065, supra, at 90-91 (emphasis added).

It should also be noted that the last item from the 1940 legislative history that Justice White uses to support his interpretation of the Act is language from S. Rep. No. 1775. See post, at 221. The language should be read in the context of all the legislative history, and particularly in the context of H. R. Rep. No. 2639, which followed S. Rep. No. 1775 and which accompanied the final version of the Act before passage. The later Report stated unambiguously: “The title . . . recognizes the personalized character of the services of investment advisers.” H. R. Rep. No. 2639, at 28.

47 15 U. S. C. §80b-2(a)(ll).

48 §§ 80b-2(a)(ll)(F), 80b-3(b), 80b-6a.

49 § 80b-2(a)(ll)(D).

50 “It is always appropriate to assume that our elected representatives, like other citizens, know the law.” Cannon v. University of Chicago, 441 (1979). Moreover, “[i]n areas where legislation might intrude on constitutional guarantees, we believe that Congress, which has always sworn to protect the Constitution, would err on the side of fundamental constitutional liberties when its legislation implicates those liberties.” Regan v. Time, Inc., 468 U. S. 641, 697 (1984) (Stevens, J., concurring in part and dissenting in part).

51 The term “tipsters” is explained in the testimony of Douglas T. Johnston, n. 38, supra — persons “who through newspaper advertisements offer to send, for a nominal price, a list of stocks that are sure to go up.” Justice White is unable “to imagine” any workable definition of the exclusion “that does not sweep in all publications that are not personally tailored to individual clients,” post, at 216. The definition Congress actually wrote, however, does not sweep in bulletins that are issued from time to time in response to episodic market activity, advertisements that “tout” particular issues, advertised lists of stocks “that are sure to go up” that are sold to individual purchasers, or publications distributed as an incident to personalized investment service.

52 Investment Advisers Act Release No. 563, 42 Fed. Reg. 2953, n. 1 (1977) (codified at 17 CFR §276 (1984)). The Commission’s reformulation of the definition of the exclusion was not drafted until 1977 — 37 years after the passage of the Act — and therefore is not entitled to the deference due a contemporaneous construction of the Act. SEC v. Sloan, 436 U. S. 103, 117 (1978). Justice White attaches significance to the fact that in the first year of the Act’s operation, 165 publishers of investment advisory services registered under the Act. Post, at 215. The fact that those firms deemed it advantageous to register does not demonstrate that the statute required them to do so.

53 The Commission’s focus on the content of the publication to determine whether a publisher is within the exclusion represents a dramatic departure from the objective criteria in the statute itself. As far as content is concerned, the statutory exclusion broadly encompasses every “business or financial publication” but then limits the category by a requirement that it be “bona fide,” and a further requirement that it be “of general and regular circulation.” Justice White makes no attempt to explain the meaning of either of these requirements, post, at 215-216, but, instead, merely emphasizes the breadth of the basic definition of an investment adviser, post, at 216-219, which admittedly is broad enough to encompass publishers. However, the basic definition must be read together with the exclusion in order to locate the place where Congress drew the line; in other words, we must give effect to every word that Congress used in the statute.

54 It is significant that the Act repeatedly refers to “clients,” not “subscribers.” See, e. g., 15 U. S. C. §§80b-l(l), 80b-3(b)(l), 80b-3(b)(2), 80b-3(b)(3), 80b-3(c)(l)(E), 80b-6(l), 80b-6(2), 80b-6(3).

55 Justice White relies on the testimony of witness James White to support his interpretation of the legislative history. Post, at 219-220. However, significantly, White stated that the term “investment adviser” includes “people who send out bulletins from time to time on the advisability of buying or selling stocks.” Such people would not fit within the exclusion for bona fide publications of regular and general circulation. Tipsters who send out bulletins from time to time on the advisability of buying or selling stocks presumably would not satisfy the requirement of “general and regular circulation” and would fall within the basic definition of investment adviser. Thus, we do not agree with Justice White’s assumption that petitioners should be equated with distributors of “tout sheets,” post, at 217, n. 3. Additionally, it is extremely doubtful that any “tipsheet” or “tout sheet” could be a “bona fide,” i. e., genuine, publication so as to claim the benefits of the exclusion.

56 Without actually determining how the exception is “supposed to mesh” with the basic definition, post, at 215, and without any consideration of the “general and regular” publication requirement, Justice White would adopt an extremely narrow, content-based, interpretation of the exclusion in order to preserve the Commission’s ability to deal with the practice of “scalping,” post, at 224. That practice is, of course, most dangerous when engaged in by a publication with a large circulation — perhaps by a columnist in an admittedly exempt publication. Cf. Zweig v. Hearst Corp., 594 F. 2d 1261 (CA9 1979). Moreover, it is incorrect to assume that the only remedies against scalping are found in the Act. The mail-fraud statute would certainly be available for many violations, and the SEC has recently had success using Rule § 10b-5 against a newsletter publisher. See SEC v. Blavin, 557 F. Supp. 1304 (ED Mich. 1983), aff’d, 760 F. 2d 706 (CA6 1985).

57 Cf. Ohralik v. Ohio State Bar Assn., 436 U. S. 447 (1978). It is significant that the Commission has not established that petitioners have had authority over the funds of subscribers; that petitioners have been delegated decisionmaking authority to handle subscribers’ portfolios or accounts; or that there have been individualized, investment-related interactions between petitioners and subscribers.

58 Moreover, because we have squarely held that the expression of opinion about a commercial product such as a loudspeaker is protected by the First Amendment, Bose Corp. v. Consumers Union of U. S., Inc., 466 U. S. 485, 513 (1984), it is difficult to see why the expression of an opinion about a marketable security should not also be protected.

59 The Commission suggests that an investment adviser may regularly provide, in newsletter form, advice to several clients based on recent developments, without tailoring the advice to each client’s individual needs, and that this is the practice of investment advising. Brief for Respondent 34, n. 44. However, the Commission does not suggest that this “practice” is involved here; thus, we have no occasion to address this concern.