THE SECURITIES and Exchange Commission continues its trespasses against the First Amendment with its vigorous campaign to license the financial press. The latest example is a series of charges that it brought against the Penny Stock Newsletter of Columbia, Md., and its president, Jerome M. Wenger. These charges have now been settled with a consent order, and the SEC has won its objective. It has once again successfully asserted its authority to regulate a publication.
To establish its legal position, the SEC is using a series of cases, like this one, in which it charges gross violations of journalistic ethics. That is a very good tactic on the SEC's part. The freedom to write and to publish creates a lot of disorder, and it is quite true that people who write and publish sometimes behave deplorably. But that has nothing to do with the central issue here, the SEC's claim of power to police these publications.
In this instance, the SEC said that Mr. Wenger had defrauded his subscribers by failing to disclose financial interests in companies about which his newsletter wrote. The paper also took money from companies, or people connected to them, about which it ran favorable articles, the SEC said. Under the consent agreement, Mr. Wenger neither confirms nor denies those charges. His lawyer says that he could afford neither the time nor the money to litigate them. But even if these charges were all correct -- and you ought by no means take that for granted -- the important thing here is the magnitude of the powers that the SEC is invoking. It is saying that the government is the proper judge of what's being published, and why, and whether the publisher deserves to be allowed to stay in business. Until now, the Constitution has unequivocally told government to stay out of those areas.
Does it not strike you as astonishing that the Reagan administration, with its well-known passion for deregulation, should be expending such energy in this campaign to extend the most detailed kind of regulation in this wholly new direction? The Reaganite confidence in the free market applies nowhere better than to the incessant flow of news, speculation and rumor that surrounds the financial world. If a publication betrays its readers, its punishment can safely be left to them. Subscribers are quite capable of judging for themselves whether they have been defrauded.
But the SEC isn't content to let it go at that. The SEC insists on protecting you, the reader, from reading things that would, in its view, mislead you. There have always been governments that wanted to protect readers from being misled. It is an impulse that has invariably ended badly.