The U.S. Supreme Court today takes up a case that could rewrite the book on Securities & Exchange Commission regulation of stock tip sheets and, perhaps, any publication that advises investors on what is hot and what is not.

The Investment Advisers Act of 1940 requires all such advisers -- including those who pass out their advice through newsletters or other publications rather than across the desk -- be registered with the SEC. Christopher L. Lowe, who turns out two Wall Street newsletters with a combined circulation of about 6,000, was registered with SEC, but that registration was revoked in 1981. The reason: Lowe's prior convictions for larceny and other crimes. Lowe's reaction? He kept on publishing his Investment & Financial Letter and Stock Advisory.

There's little doubt that Lowe broke the law. The dispute is over whether that law itself is constitutional -- at least as enforced by the SEC. Those who follow the agency say enforcement is on the upswing; a high court endorsement of that position should lead to more crackdowns on unregistered tip sheets.

The constitutional question comes up because the First Amendment guarantees freedom of the press, and the heart of that guarantee is thought to be a ban on government censorship prior to publication. The authority to close down a publication -- particularly because of objections to the moral background of its owner -- is the most sweeping form of censorship. Congress knew that in 1940, which is why it wrote a huge loophole into the registration rule, saying no registration is needed for "any bona fide newspaper, news magazine or business or financial publication of general and regular publication." In other words, if Lowe wrote the same investment advice for a daily newspaper, the SEC could not legally stop him.

That's a reasonable distinction, the U.S. Court of Appeals in Manhattan decided in a 2-to-1 vote in the Lowe case, reversing the victory he had won from the trial court. The majority stuck with a similar 1970 ruling that said, in essence, that judges must examine the total impression made by a publication to decide whether it is a real news publication or just a bunch of tips masquerading as legitimate journalism.

But publishers say such a distinction is is almost impossible to make. Glen King Parker, head of the Freedom of the Press committee of the Newsletter Association of America, warns that "the Supreme Court will have a hard time sinking newsletters without taking other publications along." In fact, part of Lowe's argument at the Supreme Court this morning will be that distinguishing between different classes of publications is itself unconstitutional, because it gives protection to certain kinds of publications while denying it to others.

That view has little in common with the way SEC looks at the problem. SEC authorities cite the reasons behind the 1940 statute: to ensure that investors get advice from persons who are at least honest. "While barring persons from practicing a profession on the grounds of misconduct may be characterized as a prior restraint on speech, revocation of a professional license is a necessary and traditional means of protecting the public from persons who are unfit to engage in the profession," argues SEC enforcement chief John M. Fedders.

Some of the registered investment advisers who publish newsletters, such as the much-followed Joseph E. Granville, agree with Fedders that regulation is needed to keep a high moral tone in the industry. Boston University investments professor Tamar Frankel told Business Week she worries that new press-freedom concerns may lead the justices to "tinker with what has been a fairly successful regulatory system." There were far more shenanigans in the investment advice field in the 1930s, she said.

The key question may turn out to be how much difference the justices see between the constitutional protection given "commercial" speech and that given to speech intended to advance social or political goals. To Fedders, the difference is huge, and he defends the SEC position by arguing that stock market newsletters "merely recommend commercial transactions." The appellate court opinion that upheld the SEC actions in the Lowe case called the registration rule "precisely the kind of regulation of commercial activity permissible under the First Amendment." The Supreme Court over the years has acknowledged that the constitution affords less protection to speech that merely is proposing a commercial transaction; but that precept usually came up in cases involving advertising, where the person doing the speaking and the one doing the selling were the same. That is generally not so in investment tip sheets.

After all, virtually all publications are commercial enterprises, put out to gather a definable audience that can then be sold to advertisers.

But if the justices decide the government can regulate opinion on commercial transactions in the securities area, "Why not real estate or drugs?" as Jack Landau, director of the Reporters Committee for Freedom of the Press, puts it.