Lowe v. Securities and Exchange Commission

Citation. Lowe v. SEC, 472 U.S. 181, 105 S. Ct. 2557, 86 L. Ed. 2d 130, 53 U.S.L.W. 4705, Fed. Sec. L. Rep. (CCH) P92,062 (U.S. June 10, 1985)

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CitationLowe v. SEC, 472 U.S. 181, 105 S. Ct. 2557, 86 L. Ed. 2d 130, 1985 U.S. LEXIS 125, 53 U.S.L.W. 4705, Fed. Sec. L. Rep. (CCH) P92,062 (U.S. June 10, 1985)

Brief Fact Summary. The Securities and Exchange Commission (SEC) (Plaintiff) wanted to stop Lowe (Defendant) and his company from printing general investment advice and commentary in a publication due to them not being registered investment advisers.

Synopsis of Rule of Law. An investment adviser cannot be prevented from publishing a nonpersonalized investment publication just because he is not registered.

Points of Law - Legal Principles in this Case for Law Students.

From a profession charged with such responsibilities there must be exacted those qualities of truth-speaking, of a high sense of honor, of granite discretion, of the strictest observance of fiduciary responsibility, that have, throughout the centuries, been compendiously described as moral character.

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Facts. Lowe Management Corp., a registered adviser, was operated by Lowe. After a series of convictions against Lowe, the SEC removed its registration. Afterwards, Lowe started publishing newsletters of general circulation that were investment related. The Sec brought an action wanting to stop Lowe Management from doing this because its registration had been revoked. The district court found the Investment Advisers Act permits a publisher who complies with the reporting and disclosure conditions to participate in publishing. The court of appeals reversed. The Supreme Court granted review.

Issue. Can investment adviser be prevented from publishing a nonpersonalized investment publication just because he is not registered?

Held. (Stevens, J.) No. An investment adviser cannot be prevented from publishing a nonpersonalized investment publication just because he is not registered. The SEC was given broad regulatory authority over those participating in the investment advice industry by the Investment Advisers Act of 1940. The Act’s creation was applicable only to those who offer personalized advice serving a certain client. So, the Act disregards a â€œpublisher of any bona fide newspaper, news magazine, or financial publication of regular general circulation.â€ The term â€œbona-fideâ€ was seemingly used to permit regulation of single issue â€œtoutsâ€ or â€œtipsâ€ in opposition to standard newsletters. In this case, Lowe Management’s publications, with their standard publication dates, seem authentic and so fall under the statutory exclusion. The SEC was not within their jurisdiction to regulate them. Reversed.

Discussion. The SEC is not completely lacking jurisdiction in this case. If the newsletters content had been misstated, inaccurate or in violation of securities laws in some other fashion, the SEC would have regained its authority to enforce sanctions but it did not, seeing as this case only dealt with powers of prior constraint.

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