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Supreme Court of the United States
January 7, 1985, Argued ; June 10, 1985, Decided
[*183] [***134] [**2559] 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. 2 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. 3 Consequently, on [****6] 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 The Commission noted that unless the registration was revoked, petitioners [*184] would be "free to engage in all aspects of the advisory business" and that even their publishing activities afforded them "opportunities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." 4
[****7] [**2560] A [***135] 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, 5 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." 6 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; [*185] for a permanent injunction enforcing compliance [****8] with the order of May 11, 1981; and for other relief. 7
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. 8
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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
LOWE ET AL. v. SECURITIES AND EXCHANGE COMMISSION
Prior History: [****1] CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT.
Disposition: 725 F.2d 892, reversed.
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Securities Law, Investment Advisers, Exemptions, Recordkeeping & Registration, General Overview, Governments, Fiduciaries, Fiduciary Responsibilities