The Supreme Court, by eight votes to zero, has now ended the Securities and Exchange Commission's campaign to license the press. If you believe that the government violates the Constitution when it tries to regulate the papers, magazines and newsletters that you buy, you have reason to join the celebration.
The SEC always argued that it had only the purest motives. It was only attempting, it said, to prevent people with improper motives from polluting the stream of financial news that flows to the public. But when has any censor claimed to be doing anything but protecting the public from the wrong kind of news? In this decision, the court has followed the great tradition of the First Amendment and told the regulators to keep their distance from printing presses -- including the small ones, and even including those run by people with dubious reputations.
This case revolves around a man named Christopher L. Lowe, who has what the court called an "unsavory history" -- a reference to his convictions for fraud and stealing. Mr. Lowe published a small financial newsletter, a pursuit for which the SEC considered him unfit. Under a piece of New Deal legislation called the Investment Advisers Act, the SEC asserted the authority to require all small financial publications to register with the government on grounds that they provide investment advice. Even more ominously, the SEC began using injunctions to suppress those publications that failed to meet its registration standards. The Lowe case was not unique. The SEC recently has been on a broad campaign to cleanse -- by its definition -- the financial press.
The court has clearly told the SEC that it has no such power. The decision, written by Justice Stevens, follows a rather circuitous logic. Congress, it holds, could not have intended the Investment Advisers Act to include newsletters because Congress knows that including them would be unconstitutional -- and therefore, it concludes, the act does not include them. In a concurring opinion, three judges -- Justice White, joined by Chief Justice Burger and Justice Rehnquist -- took a stronger and clearer position. Preventing publication is simply and flatly unconstitutional, they held.
The result is that the government can still regulate investment advisers just as it regulates doctors and lawyers. But the test is whether the advice is personal, and directed to the client's individual circumstances. Advice on stocks and bonds that is offered to the general public, meaning anyone who cares to buy a publication, is like advice on political candidates or foreign policy or which car to buy. It is protected by the First Amendment from government interference. This decision is a victory for those Americans who believe tht the SEC has no business telling them what they may or may not read.