Lowe v. Securities And Exchange Commission

472 U.S. 181 (1985)

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Nature of the Case

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Facts

D 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. D 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. P entered an order revoking the registration of the Lowe Management Corporation, and ordering P not to associate thereafter with any investment adviser. By its order P intended to stop Ds' publishing business. P commenced this action alleging that Ds were violating the Act and that D was violating the Commission's order by publishing two investment newsletters and soliciting subscriptions for a stock-chart service, which P alleged violated §203(a) of the Act. The number of subscribers to the newsletter ranged from 3,000 to 19,000. At trial, no adverse evidence concerning the quality of the publications was offered. There was no evidence that Ds' criminal convictions were related to the publications and no evidence that D had engaged in any trading activity in any securities that were the subject of advice or comment in the publications. There was no contention that any of the information published in the advisory services had been false or materially misleading. The District Court denied P the relief it requested. The court did enjoin Ds 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. The Court of Appeals for the Second Circuit reversed. It held that Ds 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. The Court of Appeals rejected Ds' constitutional claim, reasoning that this case involves 'precisely the kind of regulation of commercial activity permissible under the First Amendment.' Ds appealed. The Supreme Court 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.