CHRISTOPHER L. LOWE, ET AL., PETITIONERS V. SECURITIES AND EXCHANGE
COMMISSION

   No. 83-1911

   In the Supreme Court of the United States

   October Term, 1984

   On Writ of Certiorari to the United States Court of Appeals for the
Second Circuit

   Brief for the Securities and Exchange Commission

            TABLE OF CONTENTS
   Opinions below
   Jurisdiction
   Statement
   Summary of argument
   Argument
      I. Congress's regulation of investment advisory
         publishers under The Investment Advisers Act of
         1940 is consistent with the First Amendment:
         A. Congress has determined that investment
            advisers, including those who furnish advice
            through publications, are professionals whose
            practice must be regulated in order to protect
            the public
         B. Persons demonstrating a lack of integrity in
            financial matters may be prohibited from engaging
            in the practice of the investment advisory
            profession, including the publication of
            investment advice
            1. As a means of serving important public
               interests, including the regulation of commercial
               activity, the government may license and set
               standards for admission to the professions and
               regulate their practice, notwithstanding an
               indirect effect on speech
            2. Petitioners may constitutionally be prohibited
               from engaging in the unauthorized practice of
               the investment advisory profession
         C. Petitioners' investment advisory publications
            are entitled to no more than the First
            Amendment protection afforded communications
            characterized by the court as commercial speech
     II. The statutory exclusion for bona fide newspapers,
         magazines and financial publications of general
         circulation does not violate the equal protection
         component of the Fifth Amendment
   Conclusion

                            OPINIONS BELOW

   The opinion of the court of appeals (Pet. App. A1-A39) is reported
at 725 F.2d 892.  The opinion of the district court (Pet. App.
A41-A67) is reported at 556 F. Supp. 1359.

                             JURISDICTION

   The judgment of the court of appeals was entered on January 18,
1984.  A petition for rehearing was denied on February 22, 1984.  The
petition for a writ of certiorari was filed on May 16, 1984, and
granted on October 1, 1984.  The jurisdiction of this Court is invoked
under 28 U.S.C. 1254(1).

                          QUESTION PRESENTED

   Whether the First or Fifth Amendment renders invalid the authority
granted the Securities and Exchange Commission by the Investment
Advisers Act of 1940 to deny or revoke the registration of a publisher
of an investment advisory service on the basis of prior criminal
conduct.

                               STATEMENT

   1.a. Petitioner Christopher L. Lowe is the president of three
corporations -- petitioners Lowe Management Corporation, Lowe
Publishing Corporation and Lowe Stock Chart Service, Inc. -- through
which he has published and distributed two subscription investment
advisory services and has solicited subscriptions for a third (Pet.
App. A3, A9).  Between March 29, 1974, and May 11, 1981, Lowe
Management was registered with the Securities and Exchange Commission
as an investment adviser pursuant to Section 203(c) of the Investment
Advisers Act of 1940 (the Act), 15 U.S.C. 80b-3(c) (Pet. App. A3;
C.A. App. 132).  In addition to furnishing investment advice through
publication, Lowe Management had custody of and managed the funds of
advisory clients on a discretionary basis during this period (J.A. 8,
28).

   In 1977, Lowe pleaded guilty to two New York misdemeanors related
to his investment advisory business.  The first offense involved
Lowe's fraud on one of his advisory clients by falsely representing
that $2,200 had been invested for the client's benefit and a 27%
return earned, when in fact Lowe had misappropriated the funds for his
own use, in violation of N.Y. Gen. Bus. Law Section 352-c (McKinney
1968).  The second offense arose from Lowe's failure to register in
New York as an investment adviser, in violation of N.Y Gen. Bus. Law
Section 359-eee (McKinney 1968).  Pet. App. A3.  In April 1978, Lowe
was sentenced to a three-year period of probation for the first of
these offenses and received an unconditional discharge on the second
offense (J.A. 9).

   In 1978, Lowe pleaded guilty to two more New York offenses, both
felonies (Pet. App. A3-A4).  The first was again associated with
Lowe's advisory business, and, once again, concerned the
misappropriation of a client's funds.  Beginning in 1976, a client who
had entrusted $10,000 to Lowe for investment purposes became
dissatisfied with his accounting for the money and requested its
return.  When Lowe failed to return the funds, the client filed
complaints with both the Commission and New York authorities (J.A.
66).  On at least five separate occasions Lowe tendered a check in
settlement, and each time the check was dishonored (ibid.).  Payment
from Lowe was obtained only when criminal proceedings were instituted
against him in state court by the New York authorities (J.A. 66-67).

   During those proceedings, Lowe offered as evidence of his purported
payment to the client a copy of a money order altered to read $10,000
instead of its true value, $10 (J.A. 10).  For this fraudulent attempt
to demonstrate to the court that he had paid his former client the
full $10,000 owed to him, Lowe was convicted of tampering with
physical evidence, in violation of N.Y. Penal Law Section 215.40
(McKinney 1975) (Pet. App. A3;  J.A. 10).

   The second felony conviction resulted when Lowe fraudulently drew a
check for $684 (J.A. 10) on his account at Manufacturers Hanover Trust
Company, into which he had deposited worthless checks drawn on a
closed account (J.A. 68).  Lowe was convicted for this conduct of
third-degree grand larceny under N.Y. Penal Law Section 155.30
(McKinney 1975) (Pet. App. A3-A4;  J.A. 10).  As a result of these two
felony convictions, Lowe was sentenced in 1979 to a prison term of 60
days, to be followed by a probationary period of four years and ten
months, and was ordered to make restitution of $8,227, with interest
(J.A. 10).

   b. In 1979, the Commission instituted administrative proceedings
pursuant to Section 203(e) and (f) of the Act, 15 U.S.C. 80b-3(e) and
(f), against Lowe and Lowe Management.  Following an evidentiary
hearing and an initial decision by an administrative law judge, the
Commission issued an opinion on May 11, 1981, finding that Lowe
willfully aided and abetted willful violations by Lowe Management of
the antifraud provisions of the Act (J.A. 64-72).  /1/ The Commission
found that Lowe breached his fiduciary duty to an advisory client when
he improperly withheld the client's $10,000 and then made
misstatements regarding its return, and that Lowe Management violated
the reporting provisions of the Act /2/ by failing to amend Lowe
Management's investment adviser registration form promptly to disclose
Lowe's March 1978 convictions relating to his conduct as an investment
adviser (J.A. 67).  The Commission also invoked the provisions in
Section 203(e) and (f) of the Act that make certain of Lowe's New York
convictions a separate basis for administrative sanctions (J.A. 68).

   The Commission rejected Lowe's argument that there was no need for
sanctions because he and his advisory corporation no longer handled
clients' funds or securities, but were then solely providing advice by
publication (J.A. 69-71).  Rather, the Commission found that even
their publishing activities afforded "numerous 'opportunities for
dishonesty and self-dealing'" (J.A. 71).

   Finding that Lowe's conduct "could hardly be more serious" and
reflected a "callous disregard" for the high fiduciary standards
required of an investment adviser (J.A. 70-71), the Commission issued
an order revoking the registration of Lowe Management as an investment
adviser and barring Lowe from association with any investment adviser
(J.A. 73).  Neither Lowe nor Lowe Management sought judicial review of
the Commission's order (Pet. App. A4).  /3/

   c. Despite the May 11, 1981 Commission order, Lowe continued to
publish and distribute through his advisory corporations two
investment advisory services -- the Lowe Investment and Financial
Letter (Lowe Letter) and the Lowe Stock Advisory.  In addition, Lowe
has solicited subscriptions for a third service -- the Lowe Stock
Chart Service (J.A. 15, 28-29).  Lowe has also offered to subscribers
of six months or longer a recorded telephone "hotline" service claimed
to provide "up-to-the-minute advice" on the market (C.A. App. 153,
161, 191).  Pet. App. A5.

   The Lowe Letter is regarded by its readers as an advisory
publication designed to aid them in making investment decisions.  /4/
The legend on the masthead of the publication reveals its attraction
to investors:  "Market Timing and Stock Selection for Maximum Profits"
(see, e.g., J.A. 78).  This publication consists of predictions and
forecasts of general trends and developments in securities and other
markets, followed by advice about specific securities and other
investments (J.A. 78-85;  C.A. App. 138-189).  It offers advice on the
relative desirability of investing in, among other things, stocks,
treasury bills and money market funds, and it recommends particular
stocks or groups of stocks for purchase or sale.  Pet. App. A5-A6.

   The Lowe Letter has been disseminated to varying numbers of
clients, ranging from 3,000 clients for the August 21, 1981 issue, to
approximately 19,000 clients for the December 11, 1981 issue, with an
average of about 4,500 to 5,000 for all other issues (Pet. App. A5;
J.A. 32).  As of August 20, 1982, the Lowe Letter had approximately
2,408 paid subscribers, with an additional 2,448 persons with expired
subscriptions continuing to receive issues (J.A. 31).  Subscriptions
to the Lowe Letter cost from $39 for one year to $79 for three years
(Pet. App. A5;  C.A. App. 191).

   The Lowe Stock Advisory is an investment advisory service
specializing in low-priced stocks (under $20) listed on the American
Stock Exchange or the New York Stock Exchange or traded in the
over-the-counter market (J.A. 39;  C.A. App. 192).  /5/ Its masthead
legend -- "Sensible Speculations in Low Priced Stocks" -- testifies to
its appeal to investors (see, e.g., C.A. App. 193, 198).  The Lowe
Stock Advisory typically contains a brief introductory examination of
general market or economic trends followed by specific purchase, sale
or hold recommendations for low priced stocks (Pet. App. A6).  The
Lowe Stock Advisory, as of August 20, 1982, had approximately 278 paid
subscribers and 397 non-paying readers;  each issue has been mailed to
between 400 and 700 persons (J.A. 32).  Subscriptions cost from $39
for one year to $79 for three years (Pet. App. A6;  C.A. App. 232).
/6/

   2. The Commission brought the present action in the United States
District Court for the Eastern District of New York, seeking an order
enjoining Lowe and his three corporations from providing investment
advice in violation of the Act's registration provisions, enforcing
the Commission's 1981 order, and directing disgorgement of
subscription monies received (Pet. App. A45).  The district court
recognized (id. at A42) that, in light of Lowe's past criminal
conduct, "(t)he SEC's lack of confidence in Lowe is not without
basis," but nevertheless refused to enjoin publication of the advisory
letters (id. at A41-A67).  The court decided that a construction of
the Act that would authorize the Commission to deny or revoke the
registration of an advisory publisher for past misconduct would
constitute an improper prior restraint in violation of the First
Amendment (id. at A54-A55).  It therefore held that the Commission
could require publishers of investment advisory services to register,
but construed the Act to limit the Commission's authority to revoke an
adviser's registration to those advisers who provide their services in
person and not through publication (id. at A52).  Accordingly, the
court denied the Commission's request for an injunction against
petitioner's publication of investment advice, but granted a limited
injunction prohibiting them from rendering personal investment advice
(id. at A67).  /7/

   3. The court of appeals reversed the district court's denial of an
injunction against publication, holding that the Commission's
authority under the Act to revoke the registration of investment
advisers extends to publishers of investment advisory services and
that this statutory authority does not violate the First or Fifth
Amendments (Pet. App. A1-A39).  /8/

   The court of appeals found that Congress, in enacting the Advisers
Act, recognized the potential for abuse by publishers of investment
advice and clearly intended to regulate such publishers.  The court
concluded that there was no basis in the statute for the district
court's distinction between personal and impersonal investment advice.
 Pet. App. A8-A11.  The court also concluded (id. at A11-A13) that
Lowe's publications were not within the statutory exclusion for a
"bona fide newspaper * * * or financial publication of general and
regular circulation." Section 202(a)(11)(D), 15 U.S.C.
80b-2(a)(11)(D).

   With respect to the First Amendment challenge, the court upheld the
Commission's regulation of investment advisory publishers on two
independent grounds.  The court first held that the challenged
provisions constitute valid regulation of commercial activity.  Citing
Ohralik v. Ohio State Bar Ass'n, 436 U.S. 447, 456 (1978), in which
this Court pointed out that government "does not lose its power to
regulate commercial activity deemed harmful to the public whenever
speech is a component of that activity," the court concluded that "the
provisions of the Investment Advisers Act at issue here are precisely
the kind of regulation of commercial activity permissible under the
First Amendment" (Pet. App. A15).  The court recognized numerous
examples of commercial regulation permissible under the First
Amendment, including regulation of the transfer of information about
securities, corporate proxy statements, price and product information
among competitors, and certain labor activites (ibid.).  It considered
the registration of advisory publishers to fall within the
government's authority to license professionals and noted that "denial
of a professional license for criminal conduct has been a traditional,
and perhaps necessary, aspect of this type of regulation" (id. at
A18-A19).

   The court of appeals concluded independently that the registration
of investment advisers is a valid restriction on commercial speech.
The court reasoned that the concept of commercial speech is not
limited to advertising and is broad enough to encompass Lowe's
publications.  Pet. App. A17.

   The court rejected petitioners' claim that barring Lowe from the
advisory business was an improper prior restraint, whether the Act is
viewed as regulation of a profession or of commercial speech.
According to the court, the "regulation of professions is intended to
prevent harm to the public before it occurs" and merely punishing Lowe
for further violations of the securities laws would "hardly be
effective redress for the affected public" (Pet. App. A19).  Under the
commercial speech analysis, the court, relying on Friedman v. Rogers,
440 U.S. 1, 15 (1979), concluded that "the potential for deception
permits government to ban potentially deceptive commercial speech,"
and that, "(i)n light of Lowe's history of deceptive, criminal conduct
as an investment adviser, his publications may fairly be characterized
as potentially deceptive commerical speech" that is not entitled to
constitutional immunity from regulation (Pet. App. A19).

   Finally, the court of appeals rejected Lowe's argument that the
statutory exclusion for a "bona fide newspaper * * * or financial
publication of general and regular circulation" (Section
202(a)(11)(D), 15 U.S.C. 80b-2(a)(11)(D)) deprived him of equal
protection of the laws.  Since "the publication of investment advice
is regulable commercial activity," the court reasoned, "such
newsletters may be treated differently from other publications" (Pet.
App. A15-A16 n.5).

                          SUMMARY of ARGUMENT

   The court of appeals correctly held that the Commission's authority
under the Investment Advisers Act to deny or revoke the registration
of investment advisory publishers does not violate the First or Fifth
Amendments.

                                   I

   The Investment Advisers Act is one of several statutes in which
Congress sought to prevent recurrence of the serious abuses in the
securities markets that contributed to the Great Depression.  After
extensive study, it was determined that investment advisers, including
those who publish their advice in advisory services such as Lowe's,
are professionals who have a fiduciary relationship with their clients
and who must be regulated in order to protect those clients and the
investing public generally.  The heart of the regulatory scheme is
found in Section 203 of the Act, which requires that investment
advisers be registered with the Commission and provides that their
registration may be revoked, where necessary to protect the public, on
the basis of specified criminal and other misconduct.

   All the Commission seeks in this case is to enjoin Lowe's
unlicensed practice of the investment advisory profession.  Regulation
of the professions and of other commercial activity has long been
considered within the province of legitimate governmental activity.
While such regulation undoubtedly has an effect on speech, that fact
does not require application of the full panoply of First Amendment
protections, such as the presumption against prior restraints.  If it
did, governments would be without effective means of engaging in the
prophylactic regulation necessary to protect the public from harm.

   The Act, like similar professional licensing schemes, is not aimed
at suppressing speech.  Rather, it is a generally applicable economic
regulation.  It does not single out the press for special treatment,
but treats all advisers alike, whether they provide personal advice or
advice through publications.  Petitioners concede that prohibiting
unlicensed advisers from giving personal investment advice is
constitutional.  Unless this Court is willing either to invalidate
Congress's determination that the publication of advice presents
opportunities for abuse similar in magnitude to those presented by
personal advice, or to grant the published written word a special
status superior to that of the spoken word, application of the Act to
publishers must be upheld.

   The commercial speech doctrine is also relevant in this case, which
arises in the special context of professional regulation.  The
communications in question here simply constitute professional advice.
 They do not relate to political, cultural or philosophical issues,
but only to private economic decisionmaking concerning the relative
merits of various investments.  Whatever the core notion of commercial
speech, it would make little sense to afford petitioners' advisory
services protection under the First Amendment greater than that to
which commercial speech is entitled.  The sort of ban on potentially
deceptive speech permissible under the commercial speech doctrine is
essential for effective regulation of the professions.  There is ample
justification for prohibiting the publication of investment advice by
one with Lowe's criminal record.

                                  II

   The Act's exclusion for bona fide newspapers, magazines and
financial publications of general circulation does not deprive
advisory publishers of the equal protection of the laws.  The
restrictions in the Act do not infringe fundamental rights and are
rationally related to a legitimate governmental interest.

                               ARGUMENT

 I. CONGRESS'S REGULATION OF INVESTMENT ADVISORY PUBLISHERS UNDER THE
INVESTMENT ADVISERS ACT OF 1940 IS CONSISTENT WITH THE FIRST AMENDMENT

 A. Congress Has Determined That Investment Advisers, Including Those
Who Furnish Advice Through Publications, Are Professionals Whose
Practice Must Be Regulated In Order To Protect The Public

   The Investment Advisers Act of 1940 is premised on Congress's
determination that the business of providing investment advice is a
professional activity in which abusive practices had harmed both
individual clients and the investing public generally.  In order to
prevent such abuses from recurring, Congress embarked on a modest
program of regulation, relying primarily on a requirement that
professional investment advisers be registered with the Securities and
Exchange Commission, together with a grant of authority to the
Commission to deny or revoke the registration of an adviser for
criminal or other specified misconduct.  An understanding of the Act's
provisions and the abuses that prompted their enactment is essential
to the resolution of the questions raised by petitioners.  See
Virginia State Board of Pharmacy v. Virginia Citizen's Consumer
Council, Inc., 425 U.S. 748, 750 (1976).

   1. "The Investment Advisers Act of 1940 was the last in a series of
Acts designed to eliminate certain abuses in the securities industry,
abuses which were found to have contributed to the stock market crash
of 1929 and the depression of the 1930's." SEC v. Capital Gains
Research Bureau, Inc., 375 U.S. 180, 186 (1963).  As the Court
recognized, "'(i)t requires but little appreciation . . . of what
happened in this country during the 1920's and 1930's to realize how
essential it is that the highest ethical standards prevail' in every
facet of the securities industry." Id. at 186-187, quoting Silver v.
New York Stock Exchange, 373 U.S. 341, 366 (1963).  Congress studied
the abuses in the securities industry and took the action it
considered necessary to prevent recurrence of a similar financial
disaster.

   Congressional concern over the publication of investment advice
predates passage of the Investment Advisers Act.  The Senate hearings
on stock exchange practices, which led to the enactment of the
Securities Exchange Act of 1934, revealed widespread abuses by
publishers of investment advisory services and other financial
publications.  /9/ The Senate reported that "pool operators" -- groups
of investors who agreed to trade actively in a single security to
manipulate its price /10/ -- used market letters /11/ and investment
advisory services /12/ to disseminate false information "designed to
excite public attention toward the securit(ies)." S. Rep. 1455, 73d
Cong., 2d Sess. 41-45 (1934).  Other methods used by pool operators to
distribute propaganda included "the employment of professional
publicity agents;  the subsidizing of financial writers;  and the
distribution of 'tipster sheets' purporting to emanate from reputable
financial services and to contain scientific and statistical data
concerning the security" (id. at 44).  /13/

   It was against this background that Congress enacted the investment
Advisers Act.  The Act was a product of the Commission's study of the
investment company and investment trust industries undertaken pursuant
to Section 30 of the Public Utility Holding Company Act of 1935, 15
U.S.C. 79z-4.  In studying investment companies, the Commission
surveyed the field of investment counsel, management and advisory
services.  S. Rep. 1775, 76th Cong., 3d Sess. 1, 20 (1940) (Senate
Report).

   In studying the practices of investment advisers prior to passage
of the Act, Congress recognized that investment advisers are
professionals who should be subject to regulation similar to that of
lawyers and accountants.  Dwight C. Rose, President of the Investment
Counsel Association of America, testified that the relationship
between investment advisers and their clients is "inherently a
professional one, similar to that involved in the practice of law or
accountancy." Investment Trusts and Investment Companies:  Hearings on
S. 3580 Before a Subcomm. of the Senate Comm. on Banking and Currency,
76th Cong., 3d Sess. 738 (1940) (Senate Hearings).  Senator Wagner,
sponsor of the original bill, compared the registration of investment
advisers to the licensing of lawyers, real estate brokers, insurance
brokers and registered nurses (ibid.).  Congress was aware, moreover,
that a leading investment counsel association had endorsed the view
that the "(m)aintenance of high standards of integrity, competence,
and practice" was crucial to the advisory profession to keep the
profession "free from all forms of abuse." Senate Hearings 723.

   Congress also recognized that, as professionals, investment
advisers maintain a fiduciary relationship with their clients.  See
Capital Gains Research Bureau, Inc., 375 U.S. at 191, 194.  It
realized that the relationship between an investment adviser and his
client was one "where fraud can wreak havoc." Senate Hearings 745.
See Marketlines, Inc. v. SEC, 384 F.2d 264, 267 (2d Cir. 1967) (per
curiam), cert. denied, 390 U.S. 947 (1968) (affirming revocation of an
advisory publisher's registration).  Accordingly, Congress sought in
the Act to protect the public against abuse by unscrupulous advisers
of their position as trusted fiduciaries.  Capital Gains Research
Bureau, Inc., 375 U.S. at 190-195.

   Significantly, concern in regulating the investment advisory
profession was not limited to those advisers who provided personal
advice to individual clients, but extended to those who advised their
clients through publications as well.  Indeed, the danger that large
numbers of people will be misled to their detriment or that the
investing public generally will be harmed is considerably greater when
advice is broadly disseminated through publication.  Many of the
abuses of which Congress was aware and that formed the basis for its
decision to regulate the profession were the product of unethical
advisory publishers.

   National regulation of investment advisory publishers was deemed
necessary because of "their potential influence on security markets
and the dangerous potentialities of stock market tipsters imposing
upon unsophisticated investors." /14/ Thus, Congress was concerned
with two types of injury:  harm to investors trading generally in the
market, /15/ and direct harm to individual subscribers caused by the
investment advice they received.  A memorandum submitted to Congress
by the Commission emphasized the potential abuses arising from the
business of publishing investment advice, particularly when the
persons involved are lacking in integrity:

      Often * * * they are not honest but open to suspicion of
      willingly lending themselves to the use of stock market
      promoters and manipulators who seek to influence the course of
      security prices through the use of propaganda.  * * * The worst
      forms of tipster sheet exist for no other reason than to lure
      the investor and gambler to their financial ruin.  /16/

   Congressional concern with the segment of the profession involving
advisory publications was amply demonstrated at the hearings and in
the committee reports.  The legislation was intended to cover all
"investment advisers," a profession found to "encompass() that broad
category ranging from people who are engaged in the profession of
furnishing disinterested, impartial advice to a certain economic
stratum of our population to the other extreme, individuals engaged in
running tipster organizations, or sending through the mails stock
market letters." Senate Hearings 47;  see also Senate Report 21;
Investment Trusts and Investment Companies:  Hearings on H.R. 10065
Before a Subcomm. of the House Comm. on Interstate and Foreign
Commerce, 76th Cong., 3d Sess. 87 (1940).  Indeed, coverage
encompassing advisory publishers is made clear on the face of the
statute.  In its statement of findings in Section 201, 15 U.S.C.
80b-1, Congress found that the "advice, counsel, publications,
writings, analyses, and reports" of investment advisers "occur in such
volume as substantially to affect interstate commerce, national
securities exchanges, and other securities markets, the national
banking system and the national economy" (emphasis supplied).  In
order to provide protection against injurious practices of publishers
of investment advice, the term "investment adviser" was defined in the
Act to include any person who "engages in the business of advising
others, either directly or through publications or writings, as to the
value of securities or as to the advisability of investing in * * *
securities * * *." Section 202(a)(11), 15 U.S.C. 80b-2(a)(11)
(emphasis supplied).

   In SEC v. Capital Gains Research Bureau, Inc., supra, the Court
thoroughly reviewed the legislative history of the Act.  It found that
Congress intended to subject publishers of investment advisory
services to regulation, and to recognize under federal law the
fiduciary relationship that exists between investment advisory
publishers and their clients.  375 U.S. at 187 n.15, 191, 194.  The
Court held that the Commission could obtain an injunction requiring an
investment advisory publisher to disclose to his clients his practice
of "scalping," that is, purchasing shares of a security before
recommending it and then selling them at a profit immediately
following the recommendation.  In so holding, the Court relied on
Congress's intent to regulate the fiduciary relationship between
investment adviser and client (id. at 191-195).  The Court did not
suggest that a different standard governs those who provide investment
advice to clients through publication;  indeed, its holding
demonstrates precisely the opposite.  /17/

   2. Despite the seriousness of the abuses brought to Congress's
attention, the actual scheme of regulation it developed for investment
advisers was not extensive.  Congress did not "even remotely presume
to undertake to pass upon their qualifications." /18/ Rather than
limit access to the advisory profession to persons meeting certain
educational standards or financial responsibility requirements (as
Congress has done, for example, under the Securities Exchange Act in
the case of broker-dealers /19/ ), Congress required only that the
applicant not have engaged in certain specified misconduct involving
securities.  Section 203(e), 15 U.S.C. 80b-3(e).  But that
disqualification provision was viewed by Congress as vitally
important.  The need to prevent such persons from engaging in the
profession was emphasized in the "declaration of policy" contained in
the original bill, which stated that

      the national public interest and the interest of investors are
      adversely affected -- * * * when persons of proven lack of
      integrity in financial matters are permitted to engage in
      business as investment advisers * * *.

S. 3580, 76th Cong., 3d Sess. Section 202 (1940).  /20/ This concern
was embodied in what is now Section 203(e) of the Act, 15 U.S.C.
80b-3(e), which grants the Commission authority to deny or revoke
registration on the basis of certain types of prior misconduct.  /21/

   As explained by David Schenker, Chief Counsel of the Commission's
Investment Trust Study, the Act "merely requires registration, and
seeks to prevent frauds and keep out jailbirds and security
racketeers." /22/ Robert Healy, then Commission of the SEC, stated
that the real intent of the Act was "to see to it that men with this
kind of (criminal) record cannot go into the business of being
investment advisers." /23/ This was accomplished through the
registration provisions, the heart of the Act, by requiring advisers
"to register with the Commission, which is empowered to deny or revoke
the registration * * * of individuals convicted or enjoined by the
courts for securities fraud." H.R. Rep. 2639, 76th Cong., 3d Sess. 28
(1940).  Thus, the Act "reflects a congressional recognition 'of the
delicate fiduciary nature of an investment advisory relationship.'"
SEC v. Capital Gains Research Bureau, Inc., 375 U.S. at 191, quoting 2
L. Loss, Securities Regulation 1412 (2d ed. 1961).

   Congress reaffirmed its concern with the potential for harm if
persons guilty of misconduct involving financial matters were
permitted to engage in the investment advisory business in 1960 when
it amended Section 203(d) of the Act to expand the grounds for denial
or revocation of registration.  Pub. L. No. 86-750, Section 3(b), 74
Stat. 885.  /24/

      The committee is aware that the opportunity to advise others how
      to invest their money is becoming increasingly popular and
      lucrative.  There are now over 1,800 advisers registered under
      the act.  The committee is convinced that under the present law
      increasing opportunities exist for unscrupulous persons to
      practice as advisers.  Therefore, new grounds for denying
      entrance into the field or revoking the registration of an
      adviser have been added.

S. Rep. 1760, 86th Cong., 2d Sess. 2 (1960).  The 1960 amendment to
Section 203(d) (74 Stat. 885) was intended to make it possible for the
Commission to "exclude any person who has been convicted of a
financial type crime," /25/ such as embezzlement, fraudulent
conversion or misappropriation of funds or securities, or who has been
convicted of mail fraud, or who is found by the Commission to have
willfully violated certain of the federal securities laws.  /26/ These
provisions were again amended in 1975 /27/ to conform to similar
registration provisions for broker-dealers in the Securities Exchange
Act and to expand further the grounds for denial or revocation of
registration.  Section 203(c)(2) and (e), 15 U.S.C. 80b-3(c)(2) and
(e).  /28/

   Finally, it should be emphasized that denial or revocation of an
investment adviser's registration is neither required nor automatic
upon a finding that the person has engaged in conduct or been
convicted of a crime listed in the statute as a ground for
disqualification.  Rather, the Commission is authorized to impose
sanctions only when it finds, after a hearing, that the sanctions are
"in the public interest" (Section 203(e), 15 U.S.C. 80b-3(e)).  /29/
Moreover, a wide range of sanctions are available, including
suspension of registration and the placing of limitations on an
adviser's professional activities (ibid.).  The Commission may
therefore tailor an appropriate sanction to the danger to the public
presented by a particular person's practice of the investment advisory
profession.  See generally Marketlines, Inc. v. SEC, 384 F.2d at 267.
Any sanction imposed by the Commission is subject to review in the
courts of appeals (Section 213 of the Act, 15 U.S.C. 80b-13).  /30/

 B. Persons Demonstrating A Lack Of Integrity In Financial Matters May
Be Prohibited From Engaging In The Practice Of The Investment Advisory
Profession, Including The Publication Of Investment Advice

   It is plainly within the government's power to regulate the
practice of professions in order to protect the public.  That
authority encompasses both the power to license those who would engage
in a profession and, as a necessary corollary, the power to forbid its
practice by those who are not licensed.  Despite the indirect effect
such regulation may have upon speech, it has, with good reason, not
been thought to amount to a prior restraint or otherwise to violate
the First Amendment.

   The registration provisions of the Investment Advisers Act at issue
protect the public by regulating commercial activity -- the furnishing
of professional advice with respect to trading in securities.  The Act
is comparable to the regulation of other professions where, as here,
licensing schemes serve important public interests.  Publishers are
not singled out for special burdens, but rather are encompassed within
a single scheme applicable generally to the investment advisory
profession.  Lowe's advisory activities have been enjoined as a
prophylactic measure to protect the public from the potential for harm
arising from professional practice by one with his criminal
background.  His position is no different from that of a lawyer,
doctor or other professional who continues to practice notwithstanding
the revocation of his license.

   Petitioners admit (Br. 29) that personal investment advice may be
licensed and enjoined.  Their arguments ultimately amount to nothing
more than a disagreement with Congress over whether the potential for
harm resulting from the publication of investment advice is
sufficiently great that it should be included within the regulated
profession.  There is no basis for the Court to invalidate Congress's
determination.

 1. As a means of serving important public interests, including the
regulation of commercial activity, the government may license and set
standards for admission to the professions and regulate their
practice, notwithstanding an indirect effect on speech

   a. The government may properly regulate commercial activites,
notwithstanding an indirect effect on speech.  In Ohralik v. Ohio
State Bar Ass'n, 436 U.S. 447 (1978), for example, this Court upheld
disciplinary action against an attorney for engaging in prohibited
inperson solicitation of clients.  The Court held (436 U.S. at
456-457) that the government "does not lose its power to regulate
commercial activity deemed harmful to the public whenever speech is a
component of that activity," and point (id. at 456) to

      (n)umerous examples * * * of communications that are regulated
      without offending the First Amendment, such as the exchange of
      information about securities, SEC v. Texas Gulf Sulphur Co., 401
      F.2d 833 (CA2 1968), cert. denied, 394 U.S. 976 (1969),
      corporate proxy statements, Mills v. Electric Auto-Lite Co., 396
      U.S. 375 (1970), the exchange of price and production
      information among competitors, American Column & Lumber Co. v.
      United States, 257 U.S. 377 (1921), and employers' threats of
      retaliation for the labor activities of employees, NLRB v.
      Gissel Packing Co., 395 U.S. 575, 618 (1969).

See also National Labor Relations Board v. Retail Store Employees
Union, Local 1001, 447 U.S. 607, 616-619 (1980) (ban on secondary
picketing);  National Society of Professional Engineers v. United
States, 435 U.S. 679, 696-699 (1978) (injunction against publication
of canon of ethics of professional engineers to remedy antitrust
violation).  In each of these cases, legislation aimed at regulating
commercial activity was upheld even though the regulation had an
indirect impact on speech.

   As Justice Black stated for a unanimous Court in Giboney v. Empire
Storage & Ice Co., 336 U.S. 490 (1949), "'it has never been deemed an
abridgment of freedom of speech or press to make a course of conduct
illegal merely because the conduct was in part initiated, evidenced,
or carried out by means of language, either spoken, written, or
printed.'" Id. at 502, quoted in Ohralik, 436 U.S. at 456.  Investment
advisers, like other professionals and other persons engaging in
commercial activity, can claim no First Amendment immunity from
general commercial regulations not directed at suppressing speech.

   b. This Court has consistently found that licensing of the
professions clearly falls within the scope of legitimate governmental
regulation.  Ohralik v. Ohio State Bar Ass'n, 436 U.S. at 460;  Watson
v. Maryland, 218 U.S. 173, 177-178 (1910) ("regulations of a
particular trade or business essential to the public health and safety
are within the legislative capacity of the State * * * unless such
regulations are so unreasonable and extravagant as to interfere with
property and personal rights of citizens, unnecessarily and
arbitrarily");  Dent v. West Virginia, 129 U.S. 114, 121-123 (1889).
The Court has recognized that the government has a compelling interest
in the practice of professions and that, as part of its "power to
protect the public health, safety and other valid interests (it) ha(s)
broad power to establish standards for licensing practitioners and
regulating the practice of professions." Goldfarb v. Virginia State
Bar, 421 U.S. 773, 792 (1975).  In Ohralik, for example, the Court
affirmed an order suspending an attorney indefinitely from the
practice of law despite his First Amendment challenge, stating that
the government "bears a special responsibility for maintaining
standards among members of the licensed professions" (436 U.S. at
460).

   The government's authority to regulate the professions plainly
includes the power to deny or revoke a professional license for
criminal conduct demonstrating that the person is unfit to practice
the profession.  Barsky v. Board of Regents, 347 U.S. 442, 451 (1954).
 /31/ It is the essence of professional licensing that injury be
prevented by prohibiting unauthorized practice rather than merely
redressed, if at all, after the harm has occurred.  While speech may
be used in the course of practicing a profession, a disciplinary
scheme grounded in the protection of the public and not triggered by
an applicant's exercise of his First Amendment rights does not amount
to an unconstitutional prior restraint.  There is, as the Court has
noted, no First Amendment right to practice a particular profession.
Board of Regents v. Roth, 408 U.S. 564, 575 n.14 (1972).

   While the licensing of professionals may by its very nature be
viewed as a prior restraint on speech, the doctrine that such
restraints bear "a heavy presumption against (their) constitutional
validity" /32/ is simply not applicable in this area, for a number of
related reasons.  First, professional licensing schemes are not aimed
at suppressing speech, but at ensuring that those who provide advice
or services on which the public must rely are qualified to do so.  See
Barsky v. Board of Regents, supra.  That speech may be affected
indirectly does not turn an otherwise valid regulatory program into an
unconstitutional prior restraint.  Lowe Management's registration, for
example, was not revoked in response to speech with which the
government disagreed or in order to suppress such speech, but on the
basis of Lowe's prior criminal conduct.  Cf. Connick v. Myers, 461
U.S. 138, 142 (1983);  Pickering v. Board of Education, 391 U.S. 563,
568 (1968).

   Moreover, the principal objection to prior restraints -- that
speech will be suppressed before it can be ascertained with relative
certainty that it is unprotected by the First Amendment /33/ -- is
wholly inapplicable to the professional licensing context.  The
Investment Advisers Act, like similar professional licensing schemes,
does not seek to censor any particular message based on its harmful
impact, but to ensure that only persons of integrity are providing the
professional service in question.  /34/ It is only in this way that
the public may adequately be protected.  This Court has recognized as
much in upholding against First Amendment attack regulatory schemes
that could be characterized as prior restraints.  Ohralik v. Ohio
State Bar Ass'n, supra;  Donaldson v. Read Magazine, Inc., 333 U.S.
178, 190 (1948) (prohibition on use of mails in order to prevent
fraud).

 2. Petitioners may constitutionally be prohibited from engaging in
the unauthorized practice of the investment advisory profession

   a. The regulation of investment advisers established by Congress in
the Act falls well within its power to license members of a profession
engaged in commercial activity with an effect on interstate commerce.
As we have demonstrated (pages 11-22, supra), the Investment Advisers
Act was part of a series of statutes designed to eliminate abuses in
the securities markets.  In determining to regulate investment
advisers, Congress was legitimately concerned with the frauds and
other abuses perpetrated by advisers in the past, and concluded that
regulation of the profession was necessary to prevent a recurrence of
those abuses and the financial ruin experienced by the nation
following the stock market crash in 1929.  Accordingly, it decided to
require the registration, with certain exceptions, of those persons
who, for compensation, engage in the profession of advising others "as
to the value of securities or as to the advisability of investing in,
purchasing or selling securities." Section 202(a)(11), 15 U.S.C.
80b-2(a)(11).

   There can be no doubt that regulation of commercial activity
related to the securities markets, including that undertaken in the
Investment Advisers Act, is precisely the kind of regulation that is
permissible under the First Amendment.  The government's interest in
ensuring the integrity of the securities markets is wholly "'unrelated
to the suppression of free expression.'" Members of the City Council
v. Taxpayers for Vincent, No. 82-975 (May 15, 1984) slip op. 14,
quoting United States v. O'Brien, 391 U.S. 367, 377 (1968).  /35/ The
Act applies whether advice is given "directly" or "through
publications or writings" (Section 202(a)(11), 15 U.S.C.
80b-2(a)(11)).  Although this particular case involves an advisory
publisher, the Act applies to all investment advisers whether they
give their advice in person, over the telephone, through personal
letter or through publications of wider circulation.  In fact, the Act
also applies to persons who render their advice through the exercise
of discretionary control over the investment of their clients' funds.
Thus, its coverage does not turn on the presence of speech, or on the
form of that speech, but on the rendering of professional advice to a
client with respect to the client's purchase and sale of securities --
a commercial activity "in which speech is an essential but subordinate
component." Ohralik v. Ohio State Bar Ass'n, 436 U.S. at 457.  /36/

   The securities laws, including the Investment Advisers Act, are
broad prophylactic measures intended to prevent harm to the investing
public.  See Ernst & Ernst v. Hochfelder, 425 U.S. 185, 195 (1976).  A
necessary element of this type of regulation is the ability to
preclude persons of proven lack of integrity in financial matters from
engaging in the profession.  Congress's conclusion that investment
advisers must meet a high standard of character in order to protect
the unsuspecting public is reflected in Section 203(e) of the Act,
which authorizes the Commission to deny or revoke the registration of
investment advisers on the basis of certain types of prior misconduct
(see pages 19-21, supra).

   The justification for such a systme of regulation is readily
apparent:  after-the-fact sanctions against offenders would be wholly
inadequate.  For example, when an advisory service has improperly
touted a stock and artificially inflated its price, the numerous
investors who have relied on the recommendation and are seriously
injured when the price subsequently collapses may be without effective
redress for their trading losses (see Pet. App. A49).  Moreover,
investors generally, and ultimately the public as a whole, are harmed
by the movement of resources in response to artificial price signals.
As in other professions, prophylactic regulation is necessary to
provide adequate protection to the public, particularly in light of
the fiduciary relationship between investment advisers and their
clients.  See generally Halsted v. SEC, 182 F.2d 660, 668 (D.C. Cir.),
cert. denied, 340 U.S. 834 (1950).  This Court has therefore affirmed
professional regulation that has an impact on speech even in the
absence of actual fraudulent conduct in the particular case.  Ohralik
v. Ohio State Bar Ass'n, supra.

   Lower courts have recognized the public interest in denying unfit
persons access to the investment advisory profession, "an occupation
which can cause havoc unless engaged in by those with appropriate
background and standards." Marketlines, Inc. v. SEC, 384 F.2d at 267.
/37/ In that case, the court of appeals affirmed a Commission order
revoking the registration of an investment advisory publisher,
reasoning that the fact that the publisher "was found guilty of
various crimes * * * is quite relevant to a determination as to
whether it is in the public interest for him to continue as an
investment adviser" (ibid.).  Cf. SEC v. Suter, 732 F.2d 1294 (7th
Cir. 1984).

   In a closely analogous situation, the court in Savage v. CFTC, 548
F.2d 192 (7th Cir. 1977), rejected a First Amendment challenge to the
Commodity Futures Trading Commission's denial of registration of a
publisher of a weekly commodities newsletter.  The CFTC had denied
registration on the ground that the applicant's past violations of the
federal securities laws demonstrated his unfitness to act as an
adviser.  The court of appeals viewed the statutory authorization to
deny or revoke the registration of advisory publishers on the basis of
past misconduct as reflecting a "legislative conclusion that trading
advisors must meet a high standard of character in order to protect
unsuspecting traders" (id. at 197).  The court in Savage rejected the
publisher's contention that denial of registration was an
unconstitutional prior restraint, reasoning that Congress legitimately
determined that the most appropriate means of preventing harm to the
public was to preclude dishonest persons from engaging in the
profession, not to impose sanctions after the harm has occurred
(ibid.):

      At issue here is not the worth or accuracy of Savage's
      publication * * *.  He might well have advised his clients with
      skill as to what commodities to buy or sell.  But Congress was
      interested in the character of the adviser and publisher -- not
      his advice or publication -- and in its desire to protect the
      public it had a right to evince this interest.

         In appraising Savage's contentions, we must be mindful of a
      Congressional purpose, clearly evidenced since 1933, to protect
      the American investing and speculating public not only from
      fraud and fraudulent practices, but from those whose past
      actions indicate that they might be tempted to engage in such
      practices.

   b. Stripped to its essentials, petitioners' argument -- and that of
their supporting amici -- is that the First Amendment grants Lowe the
right to engage in the unauthorized practice of giving investment
advice through publication, notwithstanding the revocation of his
professional license for prior criminal conduct.  They respond /38/ in
two ways to the argument that investment advisers are professionals
who may be licensed.  First, it is suggested that publishers of
investment advice should not be regarded as professionals even if
personal advisers are.  Second, it is suggested that publishers of
written material, even if professional advisers, are entitled to
special constitutional protection denied personal advisers.  Neither
point has merit.

   Petitioners admit (Br. 29) that "personal investment advisers who
give personal advice to individual clients may be licensed as
professionals and their licenses may be revoked for misconduct." /39/
They would distinguish the publication of investment advice by relying
on cases holding that the publication of legal materials does not
constitute the practice of law.  See, e.g., New York County Lawyers'
Ass'n v. Dacey, 21 N.Y.2d 694, 234 N.E.2d 459, 287 N.Y.S.2d 422
(1967), adopting the dissenting opinion of the Appellate Division, 28
A.D.2d 161, 283 N.Y.S.2d 984 (1967).  This reliance is misplaced.
Congress has determined, and this Court has recognized, /40/ that a
fiduciary relationship exists between publishers of investment advice
and their clients, and that the dangers arising from the unregulated
furnishing of advice through publication are sufficiently great to
justify government action (see pages 15-17, supra).  While the
practice of law has historically been characterized by personal
advice, /41/ the investment advisory profession has not.  As we have
demonstrated, Congress studied the investment advisory profession in
1940 and found that the profession includes both types of advisers.
Based on its findings, it determined to eliminate the abuses
associated with investment advisory publishers as well as with
personal advisers.  /42/ Neither petitioners nor amici point to any
facts that would justify this Court's invalidation of that legislative
determination.  /43/

   Petitioners seek to bolster their argument by contending that their
publications cannot be viewed as regulable professional or commercial
activity in which speech is a "subordinate component" because
publishing written materials "is the only activity in which they are
engaged" (Br. 28;  emphasis in original).  But the Act regulates the
furnishing of investment advice regardless of the medium;  it
encompasses pure conduct where advice is given through the management
of a client's funds.  And many professions, including the practice of
law, involve only or primarily speech.  Petitioner's argument sweeps
much too broadly:  it would require the invalidation of a wide variety
of licensing schemes whose necessity is undoubted and whose propriety
has gone unquestioned.  There is no principled distinction between
Lowe and the disbarred lawyer who asserts a First Amendment right to
advise clients and file briefs and present oral argument on their
behalf.  The states' ability to license lawyers who limit their
practice to the giving of advice, /44/ for example, would, therefore
become constitutionally vulnerable.  Moreover, because an investment
adviser who provides only personal advice must do so through speech,
he could claim on petitioners' theory, the same immunity from
regulation as is contended publishers enjoy.  Such a result is at odds
with their concession that personal advisers may be regulated.
Finally, the compelling interests in protecting the public from harm
that prompted Congress to regulate the profession and that form the
basis for the regulation of other professions justify such licensing
schemes regardless of the degree to which the bulk of any particular
profession's activities consist of speech.  As this Court has stated:

      "(T)o say that the ordinance presents a First Amendment issue is
      not necessarily to say that it constitutes a First Amendment
      violation." Metromedia, Inc. v. San Diego, 453 U.S. 490, 561
      (1981) (Burger, C.J., dissenting).  It has been clear since this
      Court's earliest decisions concerning the freedom of speech that
      the state may sometimes curtail speech when necessary to advance
      a significant and legitimate state interest.

Members of the City Council v. Taxpayers for Vincent, No. 82-975 (May
15, 1984), slip op. 13.

   Petitioners are not entitled to any special First Amendment
privilege simply because they provide published rather than personal
advice.  If Lowe can be subject to government regulation when he
recommends securities to one client, as he admits (Br. 29), he may be
subject to regulation when he sends his recommendations by publication
to 100 clients or 1,000 clients.  As Justic Harlan noted for a
plurality of the Court in Curtis Publishing Co. v. Butts, 388 U.S.
130, 150 (1967) (citations and footnotes omitted):

      A business "is not immune from regulation because it is an
      agency of the press.  The publisher of a newspaper has no
      special immunity from the application of general laws * * *."
      Federal securities regulation, mail fraud statutes, and
      common-law actions for deceit and misrepresentation are only
      some examples of our understanding that the right to communicate
      information of public interest is not "unconditional."

   This Court has emphasized that "the First Amendment does not
prohibit all regulation of the press.  It is beyond dispute that the
States and Federal Government can subject newspapers to generally
applicable economic regulation without creating constitutional
problems." Minneapolis Star & Tribune Co. v. Minnesota Commissioner of
Revenue, 460 U.S. 575, 581 (1983).  /45/ The statute must not,
however, single out the press for special treatment and thereby place
an undue burden on the freedom of the press.  See id. at 582-583 (tax
on printing materials);  Grosjean v. American Press Co., 297 U.S. 233
(1936) (licensing tax on publishers unconstitutional).

   The Investment Advisers Act does not single out the press, but
instead requires registration of all persons who engage in the
business of rendering investment advice "directly" or "through
publications or writings." Thus, the Act is not, as petitioners
contend (Br. 16), a "(l)icensing of the press." It applies to all
investment advisers whether they given their advice in person or
through publications.  In fact, the Act primarily affects the
rendering of personal investment advice.  Of the more than 9,000
registered investment advisers, only about 500 give investment advice
solely through periodic publications.  This is no reason for exempting
all advisory publishers, a substantial portion of whom also give
personal advice.  But it does show that the Act is a "generally
applicable economic regulation()" that does not single out the press
for discriminatory treatment.  Minneapolis Star & Tribune Co., 460
U.S. at 581.  /46/ The relevant distinction is not between personal
advisers and those who publish, but between advisers who are fit to
practice the profession and those who, because of criminal misconduct,
are not.

   c. Petitioners also argue (Br. 37-38) /47/ that the Act's
regulation is excessive because disclosure of Lowe's criminal conduct
would be a sufficiently effective method of regulation.  In other
areas of professional regulation, however, the government has not been
limited to disclosure mechanisms to ensure the integrity of the
profession.  Surely a lawyer who misappropriated his client's funds
has no constitutional right to continue engaging in the practice of
law so long as he discloses his misdeeds.  Indeed, in Virginia State
Board of Pharmacy v. Virginia Consumers Council, Inc., 425 U.S. 748
(1976), the Court struck down limitations on advertising because the
asserted state interest -- preserving professional standards -- was
more directly served by setting standards and revoking the licenses of
persons guilty of professional dereliction (425 U.S. at 768-769).  But
such standards are precisely the regulatory tools petitioners would
deny Congress and the Commission with respect to the investment
advisory profession.

   The regulatory framework envisioned by petitioners (Br. 39), in
which dishonest persons would be allowed to continue to practice their
profession so long as they disclosed their prior convictions, would
not only be unprecedented but unworkable as well.  There is no
guarantee that the required disclosures would in fact be made.
Indeed, Lowe's past violations of the Commission's disclosure rules
(see page 4, supra) and of the clear prohibitions against misleading
his clients and misappropriating their funds amply demonstrate that he
may well continue to violate disclosure requirements if allowed to
remain in the profession.  /48/ It is unrealistic to expect the
Commission to be able to keep past wrongdoers under surveillance to
ensure that they do not engage in future misconduct.  SEC v. Shapiro,
494 F.2d 1301, 1309 (2d Cir. 1974);  see also Mitchell v. Pidcock, 299
F.2d 281, 287 (5th Cir. 1962);  SEC v. Culpepper, 270 F.2d 241, 250
(2d Cir. 1959).  This is particularly true where the dishonest
individuals, such as Lowe, remain in a profession involving a
fiduciary relationship that presents the opportunity to inflict
serious harm on their clients.  No matter how extensive the statutory
disclosure requirements, there can be no adequate assurance that
dishonest publishers will refrain from using their influence over
investors for their personal gain and to their clients' ruin.

   d. Petitioners, joined by amici, /49/ argue (Br. 18, 21) that the
injunction authorized by the court of appeals to enforce the
registration provisions of the Act would operate as an impermissible
prior restraint.  In Pittsburgh Press Co. v. Pittsburgh Comm'n on
Human Relations, 413 U.S. 376, 390 (1973), however, this Court
recognized that "it has never been held that all injunctions (against
speech) are impermissible." The injunction forbidding practice of the
profession by an unregistered adviser is simply the enforcement
mechanism necessary to make the regulatory program effective.  It is
no different in any relevant respect from an injunction against the
continuing practice of law without a license.

   The injunction endorsed by the court of appeals would merely enjoin
Lowe from rendering investment advice while not registered with the
Commission.  /50/ As was the case in Pittsburgh Press Co., "(t)he
present order does not endanger arguably protected speech.  Because
the order is based on a continuing course of repetitive conduct, this
is not a case in which the court is asked to speculate as to the
effect of publication." 413 U.S. at 390.  In National Society of
Professional Engineers v. United States, 435 U.S. 679, 697 (1978), the
Court upheld an injunction against publication of a canon of ethics in
order to restrain unlawful trade practices.  In NLRB v. Gissell
Packing Co., 395 U.S. 575, 616-620 (1969), the Court upheld an order
directing an employer to cease and desist from making coercive
statements to employees in violation of Section 8(c) of the National
Labor Relations Act.  These precedents fully support an injunction
against Lowe's publication of unregistered investment advice, as does
the Court's approval of an injunction against secondary picketing in
Giboney v. Empire Storage Co., 336 U.S. at 498, which "did no more
than enjoin an offesnse against (state) law." Again, in Lorain Journal
Co. v. United States, 342 U.S. 143, 156 (1951), the Court noted that
an injunction may be applied to a newspaper's publication policies to
enforce the Sherman Act.  So here.  Since Congress has properly
declared unlawful the rendering of investment advice by those not
registered with the Commission, a court may properly enjoint such
illegal activity.

 C. Petitioner's Investment Advisory Publications Are Entitled To No
More Than The First Amendment Protection Afforded Communications
Characterized By The Court As Commercial Speech

   Although it preferred to analyze this case as involving the
regulation of professional or commercial activity, the court of
appeals also concluded that regulation of investment advisory
publications is proper under the commercial speech doctrine (Pet. App.
A17).  The two rationales, though in some respects independent, are
closely related.  Both involve the power of governments to regulate
money-making activity.  In Ohralik v. Ohio State Bar Ass'n, supra, for
example, the Court discussed the regulation of commercial speech in
the context of the regulation of commercial activity generally,
including activities carried out through speech (436 U.S. at 455-456).
 See pages 23-25, supra.  The Court determined that prohibition of
in-person solicitation by lawyers "falls within the State's proper
sphere of economic and professional regulation" (436 U.S. at 459) not
only because of the state's strong interest in protecting the public
from professional abuses (id. at 460-468), but also because the
lawyer's solicitation did not "involve() political expression or an
exercise of associational freedom" (id. at 458).  Compare In re
Primus, supra.

   This rationale applies fully to Lowe's investment advisory
publications.  Lowe is not seeking to comment on cultural,
philosophical, political or religious issues, or to associate with
others.  Rather, like the solicitation in Ohralik, the labor picketing
in NLRB v. Retail Store Employees Union, supra, and the corporate
proxy statements in Mills v. Electric Auto-Lite, supra, Lowe's speech
relates only to private commercial or economic decisionmaking -- the
advisability of purchasing or selling securities.  Moreover, Lowe
seeks only to ply his investment advisory trade -- to sell his
professional advisory services to particular persons who are willing
to pay for it.  That trade may, as we have demonstrated (see pages
22-39, supra), be regulated to protect the public notwithstanding an
effect on speech.

   1. Communications such as Lowe's, made in the course of regulated
commercial activities and not evincing a political or other
noncommercial content, should receive no more than the First Amendment
protection afforded commercial speech.  Lowe's publications share many
important characteristics with communications that the Court has
recently categorized as commercial speech.  We recognize that his
advisory publications do not in all respects meet the more narrow
definitions that the Court has sometimes used in referring to
commercial speech.  Nonetheless, we submit that, at least in the
special context of the professions, these sorts of communications,
intended to influence private economic decisionmaking, may
appropriately be considered a variety of commercial speech and
regulated accordingly.  /51/

   The reasons this Court has afforded diminished First Amendment
protection to commercial speech apply equally to Lowe's publication of
investment advice.  Unlike speech of a "cultural, philosophical or
political" nature, which is afforded full First Amendment protection
because of its essential role in effective self-government, /52/
commercial speech derives its constitional value solely because of the
role it performs in our free enterprise economy where "the allocation
of our resources in large measure will be made through numerous
private economic decisions.  It is a matter of public interest that
those decisions, in the aggregate, be intelligent and well informed."
Virginia State Board of Pharmacy, 425 U.S. at 765.  "(C)ommercial
speech serves to inform the public of the availability, nature, and
prices of products and services, and thus performs an indispensible
role in the allocation of resources in a free enterprise system."
Bates v. State Bar, 433 U.S. 350, 364 (1977).

   Investment advisory publications serve the same societal purpose as
the communications at issue in this Court's commercial speech cases.
Rather than providing a forum for philosophical, religious or
political discussion, or even for discussion of a general commercial
or economic nature (see Abood v. Detroit Board of Education, 431 U.S.
209, 231 (1977)), they seek to advise clients on the relative merits
of various investments and as such merely recommend commercial
transactions.  The purpose of investment advice such as that at issue
here "is strictly business" (Friedman v. Rogers, 440 U.S. at 11), and
the primary and immediate goal of the advisory publications is to
"inform private economic decisions" (Village of Schaumburg v. Citizens
for a Better Environment, 444 U.S. 620, 632 (1980)).  In short, the
advisory letters do no more than tell the reader how to spend his
money.  /53/

   The right to comment on cultural, philosophical, political, and
religious issues plays a central role in our system of government and
thus has been afforded maximum protection under the First Amendment.
But, as this Court noted in Ohralik, 436 U.S. at 456:

      To require a parity of constitutional protection for commercial
      and noncommercial speech alike could invite dilution, simply by
      a leveling process, of the force of the Amendment's guarantee
      with respect to the latter kind of speech.  Rather than subject
      the First Amendment to such a devitalization, we instead have
      afforded commercial speech a limited measure of protection,
      commensurate with its subordinate position in the scale of First
      Amendment values * * *.  /54/

Affording Lowe's publications full protection would result in a
devitalization of the First Amendment by eliminating the distinction
the Court has carefully preserved between speech relating only to
commercial activity and political or ideological speech.  Accordingly,
Lowe's advisory publications should be entitled to less First
Amendment protection than other constitutionally safeguarded forms of
expression.  Bolger v. Youngs Drug Products Corp., No. 81-1590 (June
24, 1983), slip op. 4-5;  Central Hudson Gas & Electric Corp. v.
Public Service Comm'n, 447 U.S. 557, 562-563 (1980);  Virginia State
Board of Pharmacy, 425 U.S. at 771-772 n.24.

   Petitioners argue (Br.36) that investment newsletters do not
significantly differ from comments on particular products and services
in such publications as Consumer Reports and Motor Trends.  /55/ This
argument, however, ignores the professional context in which
investment advice is given and the overriding government interest in
regulating that profession.  /56/ The Court has recognized that
communications made by heavily regulated businesses in the context of
commercial transactions are "of less constitutional moment than other
forms of speech." Central Hudson Gas & Electric Corp. v. Public
Service Comm'n, 447 U.S. 557, 563 n.5 (1980).  This is all the more
true where regulation of the professions is involved.  See Friedman v.
Rogers, supra;  Ohralik v. Ohio State Bar Ass'n, supra.  Petitioners'
"speech," made solely in the context of their conduct within a
licensed profession, is surely deserving of no more protection than is
commercial speech generally.  Otherwise, the power of the government
to set professional standards and license admission to the professions
could well be subject to First Amendment invalidation.

   2. Because professional investment advice should receive no greater
protection than is accorded commercial speech generally, the Court
should look to its commercial speech cases to determine the highest
appropriate level of First Amendment protection in this case.  "The
Constitution accords less protection to commercial speech than to
other constitutionally safeguarded forms of expression." Bolger v.
Youngs Drug Products Corp., slip op. 4-5.  See Central Hudson Gas &
Electric Corp., 447 U.S. at 562-563;  Virigina State Board of
Pharmacy, 425 U.S. at 771-772 n.24.  The Court's decisions have
recognized a "common sense distinction" between commercial speech,
which occurs in an area traditionally subject to government
regulation, and other varieties of speech.  Bolger, slip op. 4;
Ohralik v. Ohio State Bar Ass'n, 436 U.S. at 455-456.  Thus,
regulation that would not be permissible if applied to fully protected
speech may well be proper with respect to commercial speech.  For
example, the Court has stated on a number of occasions that the
presumption against prior restraints may not apply to commercial
speech.  Central Hudson, 447 U.S. at 571 n.13;  Friedman v. Rogers,
440 U.S. at 10;  Virginia State Board of Pharmacy, 425 U.S. at 771-772
n.24.

   Moreover, the Court has recently indicated that "content-based
restrictions," which are upheld only in the most "extraordinary
circumstances" with respect to noncommercial speech, are "less
problematic" when applied to commercial speech.  Bolger, slip op. 5.
See Metromedia, Inc. v. City of San Diego, 453 U.S. 490, 512 (1981);
Friedman v. Rogers, 440 U.S. at 11-16;  Ohralik, 436 U.S. at 455-456.
In fact, whenever this Court has applied a less strict analysis to
commercial speech than it would with respect to noncommercial speech,
it has engaged in precisely the sort of content-based analysis to
which petitioners object (Br. 24-25).  Thus, for example, this Court
has upheld a prohibition against in-person solicitation of clients by
lawyers when engaged in for commercial purposes but protected that
activity when engaged in for political or social reasons.  Compare
Ohralik with In re Primus, 436 U.S. 412 (1978) (decided the same day).
 Similarly, the Court afforded less protection to a utility's
promotional advertising than to a utility's comments on issues of
public interest.  Compare Central Hudson with Consolidated Edison Co.
v. Public Service Comm'n, 447 U.S. 530 (1980) (decided the same day).
See also Pittsburgh Press Co. v. Pittsburgh Comm'n on Human Relations,
413 U.S. 376, 385-386 (1973).  Thus, "'(t)he protection available for
particular commercial expression turns on the nature both of the
expression and of the governmental interests served by its
regulation.'" Bolger, slip op. 8, quoting Central Hudson, 447 U.S. at
563.

   Government regulation of commercial speech will be upheld so long
as it is not more extensive than is necessary to achieve a substantial
government interest.  Bolger, slip op. 9;  Central Hudson, 447 U.S. at
566.  As we have demonstrated (see pages 27-39, supra), the ability to
bar persons lacking in integrity in financial matters from engaging in
the investment advisory profession is essential to the regulation of
that profession.

   Petitioners challenge the court of appeals' conclusion that their
publications may be enjoined because they are potentially misleading,
urging (Br. 37-38) that the government cannot bar speech unless it is
found to be actually misleading.  By extending limited First Amendment
portection to commercial speech, however, this Court has stated that
it did not intend to "prohibit the State from insuring that the stream
of commercial information flow(s) cleanly as well as freely." Virginia
State Board of Pharmacy, 425 U.S. at 772.  If the government is
deprived of the ability to bar certain types of commercial speech that
have a potential for abuse, and must instead demonstrate actual
deception in each case, Congress's power to enact prophylactic
measures to protect the public from misleading speech would be
"substantially diminished." Ohralik v. Ohio State Bar Ass'n, 436 U.S.
at 466;  see also United States v. Readers Digest Ass'n, 662 F.2d 955
(3d Cir. 1981), cert. denied, 455 U.S. 908 (1982).

   In Central Hudson, the Court emphasized that the test is not
whether the speech in question is in fact misleading;  it is
sufficient that the speech lends itself to such abuse.  This is made
clear both by the language of Central Hudson and by the prior
decisions relied on in that case.  Thus, the Court stated that "(t)he
government may ban forms of communication more likely to deceive the
public than to inform it." 447 U.S. at 563 (emphasis supplied), citing
Friedman v. Rogers, 440 U.S. at 13, 15-16;  Ohralik v. Ohio State Bar
Ass'n, 436 U.S. at 464-465;  In re R.M.J., 455 U.S. 191, 203 (1982).
In Ohralik the Court ruled that "(t)he State's perception of the
potential for harm" justifies banning speech "inherently conducive to
overreaching and other forms of misconduct." 436 U.S. at 464 (emphasis
supplied).  The regulation of speech at issue in Ohralik prohibited
in-person client solicitations by lawyers.  The Court dismissed the
argument that the state must prove that the lawyer in fact took
advantage of his clients, holding that a state may adopt "prophylactic
measures whose objective is the prevention of harm before it occurs."
Ibid.

   Similarly, in Friedman v. Rogers, supra, this Court approved a
total ban by Texas on optometrists' use of trade names on the ground
that their use was conducive to deception and manipulation, thus
leading to a "significant possibility that trade names will be used to
mislead the public." 440 U.S. at 12-13 (emphasis supplied).  The Court
found it irrelevant that the use of a trade name was "not in fact
misleading," since it was a type of speech "which enhances the
opportunity for misleading practices." Id. at 15.

   The Court in Friedman upheld the ban on the use of trade names in
part because of its reluctance to second-guess the legislature on the
need to ban certain potentially misleading speech (440 U.S. at 13):

      The concerns of the Texas Legislature about the deceptive and
      misleading uses of optometrical trade names were not speculative
      or hypothetical, but were based on experience in Texas with
      which the legislature was familiar when * * * it enacted (the
      ban).

Similarly, there was nothing "speculative" or "hypothetical" about
Congress's conclusion that persons guilty of past financial dishonesty
are more likely to commit future violations which could lead investors
to financial ruin.  The Act's regulation of publishers was a result of
Congress's concern with "the dangerous potentialities of stock market
tipsters imposing upon unsophisticated investors." Senate Report at
21.  Further, Congress was aware in 1960 that "increasing
opportunities exist for unscrupulous persons to practice as advisers"
(see pages 20-21, supra), a situation which led to it to strengthen
the Commission's authority to deny or revoke the registration of
persons guilty of past misconduct.  Thus, as was the case in Friedman,
the record before Congress demonstrating the need for regulating the
publication of investment advice by unscrupulous persons was
"substantial and well demonstrated." 440 U.S. at 15.

   Finally, no constitutional basis exists to support the argument
that Congress is limited to imposing disclosure requirements in
regulating the profession.  While it is true that "some limited
supplementation, by way of warning or disclaimer or the like, might be
required * * *" of even truthful speech "to assure that the consumer
is not misled" (Bates, 433 U.S. at 383-384), this Court in Friedman v.
Rogers emphatically stated that "there is no First Amendment * * *
rule" requiring the government to rely upon "publication of additional
information (to) clarify or offset the effects" of the potentially
misleading speech involved in that case (440 U.S. at 12 n.11).  To the
contrary, "when experience has prove(n) that (commercial speech) in
fact * * * is subject to abuse," this Court has ruled that it may be
"prohibited entirely." In re R.M.J., 455 U.S. at 203.  As we have
demonstrated (pages 36-37, supra), disclosure requirements would be
wholly inadequate to remedy the evil Congress sought to address in the
Act.  The Act's registration provisions are no more extensive than
necessary to achieve a substantial government interest and therefore
must be upheld under the First Amendment.

 II. THE STATUTORY EXCLUSION FOR BONA FIDE NEWSPAPERS, MAGAZINES AND
FINANCIAL PUBLICATIONS OF GENERAL CIRCULATION DOES NOT VIOLATE THE
EQUAL PROTECTION COMPONENT OF THE FIFTH AMENDMENT

   The court of appeals correctly rejected petitioners' argument (Br.
39-45), not raised by any amicus, that the Act violates Lowe's right
to equal protection under the Fifth Amendment by reason of the
exclusion from the definition of investment adviser in Section
202(a)(11)(D) of the Act, 15 U.S.C. 80b-2(a)(11)(D), of any "bona fide
newspaper, news magazine or business or financial publication of
general and regular circulation" (Pet. App. A15-A16 n.5).  /57/ As
this Court has consistently held:

      Unless a classification trammels fundamental personal rights or
      is drawn upon inherently suspect distinctions such as race,
      religion, or alienage, our decisions presume the
      constitutionality of the statutory discriminations and require
      only that the classification challenged be rationally related to
      a legitimate state interest.

City of New Orleans v. Dukes, 427 U.S. 297, 303 (1976).  Accord, e.g.,
Hodel v. Indiana, 452 U.S. 314, 331 (1981);  Schweiker v. Wilson, 450
U.S. 221, 230 (1981).  Petitioners' argument that the Act's
classification denies them equal protection is insubstantial.

   The classifications in the Act do not trammel fundamental rights.
Although First Amendment rights are implicated, petitioners' speech,
arising out of Lowe's practice of the advisory profession, is plainly
subject to government regulation.  Compare Police Dep't v. Mosley, 408
U.S. 92, 99 (1972);  Williams v. Rhodes, 393 U.S. 23 (1968).
Accordingly, the challenged classification, like any other arising out
of the regulation of professional activity, must be considered under
the "rational basis" test.  See Friedman v. Rogers, 440 U.S. at 17;
Williamson v. Lee Optical Co., 348 U.S. 483 (1955).

   The governing rule is that "social and economic legislation is
valid unless 'the varying treatment of different groups or persons is
so unrelated to the achievement of any combination of legitimate
purposes that (a court) can only conclude that the legislature's
actions were irrational.'" Hodel v. Indiana, 452 U.S. at 332, quoting
Vance v. Bradley, 440 U.S. 93, 97 (1979).  See Duke Power Co. v.
Carolina Environmental Study Group, Inc., 438 U.S. 59, 82-84 (1978).
This Court "has consistently refused to invalidate on equal protection
grounds legislation which it simply deemed unwise or unartfully
drawn." United States Railroad Retirement Board v. Fritz, 449 U.S.
166, 175 (1980).  "If the classification has 'reasonable Basis,' it
does not offend the Constitution simply because the classification 'is
not made with mathematical nicety or because in practice it results in
some inequality.'" Dandridge v. Willaims, 397 U.S. 471, 485 (1970),
quoting Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 78 (1911).

   The Act's exclusion for bona fide newspapers is fully consistent
with and furthers the government's substantial interest in regulating
the activities of investment advisory publishers.  The exclusion
applies to "those publications which do not deviate from customary
newspaper activities to such an extent that there is a likelihood that
the wrongdoing which the Act was designed to prevent has occurred."
SEC v. Wall Street Transcript Corp., 422 F.2d 1371, 1377 (2d Cir.),
cert. denied, 398 U.S. 958 (1970).  The Commission has interpreted the
exception to apply only where, "based on the content, advertising
material, readership and other relevant factors, a publication is not
primarily a vehicle for distributing investment advice." Investment
Advisers Act Rel. No. 563, 42 Fed. Reg. 2953 n.1 (1977).  See SEC v.
Suter, 732 F.2d 1294, 1297 (7th Cir. 1984).  Publications designed
primarily to provide investment advice are more likely to be used for
fraudulent and abusive practices than those which are not.  /58/ A
classification, such as that embodied in Section 202(a)(11), which is
based on the presence of abuses the regulation seeks to eliminate,
necessarily advances the government's interest and assures that the
regulation will not be more extensive than necessary to serve the
interest.  While abuses may to some degree arise out of excluded
publications, Congress may "address() itself to the phase of the
problem which seems most acute to the legislative mind. * * * The
legislature may select one phase of one field and apply a remedy
there, neglecting the others." Willaimson v. Lee Optical Co., 348 U.S.
at 489.

                              CONCLUSION

   The judgment of the court of appeals should be affirmed.

   Respectfully submitted.

   REX E. LEE

      Solicitor General

   LOUIS F. CLAIBORNE

      Deputy Solicitor General

   BRUCE N. KUHLIK

      Assistant to the Solicitor General

   DANIEL L. GOELZER

      General Counsel

   PAUL GONSON

      Solicitor

   JACOB H. STILLMAN

      Associate General Counsel

   ALAN ROSENBLAT

      Assistant General Counsel

   DAVID A. SIRIGNANO

      Assistant General Counsel

   GERARD S. CITERA

      Attorney Securities and Exchange Commission

   DECEMBER 1984

   /1/ In re Lowe Management Corp., (1981 Transfer Binder) Fed. Sec.
L. Rep. (CCH) Paragraph 82,873 (May 11, 1981).

   /2/ Section 204 of the Act, 15 U.S.C. 80b-4, and Rule 204-1(b)
thereunder, 17 C.F.R. 275.204-1(b).

   /3/ Subsequent to the Commission's proceedings, Lowe pleaded guilty
in 1982 to two felony counts of theft by deception in the
third-degree, in violation of N.J. Stat. Ann. Section 2C:20-4 (West
1982) (J.A. 74-76).  Lowe had fraudulently misrepresented to two New
Jersey banks that certain checks were good and negotiable, when in
fact he knew they were worthless.  Pet. App. A5.

   /4/ As one client testified (J.A. 36, 37):

      (The Lowe Letter) is an investment advisory service to help
      people with their investments, to guide them through and select
      the proper securities for investment.

                      *     *     *     *     *

      I subscribed to the letter to receive the advice that I needed
      for investments.

The Lowe Letter "is advertised as a semi-monthly publication, but at
least since May 1981, it has appeared only at irregular intervals"
(Pet. App. A42-A43).

   /5/ The publication has been distributed on an infrequent,
irregular basis.  See Pet. App. A43.

   /6/ The Lowe Stock Chart Service is advertised as a service
containing "(o)ver ten pages of technical and fundamental indicators"
for particular stocks traded on the New York Stock Exchange, on the
American Stock Exchange and in the over-the-counter market (C.A. App.
203, 205).  The sample charts distributed analyze the trading patterns
of selected securities and provide information concerning the
projected future earnings for certain corporate issuers (see C.A. App.
202-209).  This publication, as in the case of the other Lowe
publications, is designed to assist clients in their investment
decisions.  The Lowe Stock Chart Service has solicited subscriptions
since late 1980 (J.A. 33, 42), and, as of August 20, 1982, had
approximately 44 paid subscribers (J.A. 32), who paid from $33 for
five weeks of service to $449 for one year (C.A. App. 203, 206).  As
of the date of trial no issues of the Lowe Stock Chart Service, other
than a few sample charts (C.A. App. 204-209), had ever been
distributed (J.A. 33).  See Pet. App. A6, A43-A44.

   /7/ The court also enjoined petitioners from providing their advice
by individual letter or recorded telephone "hotline" service (Pet.
App. A67).

   /8/ District Judge Brieant, sitting by designation, dissented on
grounds similar to those stated by the district court (Pet. App.
A23-A29).  Judge Van Graafeiland joined Judge Oakes' majority opinion
and filed a concurrence (id. at A20-A22).

   /9/ Stock Exchange Practices:  Hearings on S. Res. 84 Before the
Senate Comm. on Banking and Currency, 72d Cong., 1st Sess. 302,
446-464, 601-602, 672-712 (1932);  Stock Exchange Practices:  Hearings
on S. Res. 56 and S. Res. 97 Before the Senate Comm. on Banking and
Currency, 73d Cong., 1st Sess. 5899-5904 (1934).

   /10/ S. Rep. 1455, 73d Cong., 2d Sess. 45 (1934) (S. Rep. 1455).

   /11/ Market letters that made favorable comments on a particular
stock were distributed by a brokerage firm while interested persons at
the firm held options on the stock that would increase in value if the
price of the stock rose.  S. Rep. 1455, supra, at 41-43.

   /12/ A publisher of an advisory service known as the "Stock and
Bond Reporter" publicized particular stocks that formed the basis of
pool operations in return for substantial blocks of stock from the
pool operators.  The publisher also employed newspaper writers to
write articles publicizing his stocks and hired a person to broadcast
over the radio claiming to be a legitimate economist and president of
an independent research organization.  Between 1928 and 1930, the
publisher was involved in 250 pool operations and realized a net
profit of half a million dollars.  S. Rep. 1455, supra, at 44.

   /13/ The committee report accompanying the Senate draft of the
Securities Exchange Act described the type of abuses then present in
the industry:

      (I)t was not uncommon for market operators to employ a publicity
      agent to tout a stock in which they were momentarily interested.
       In one instance a financial writer on a great New York
      newspaper was discovered to have been a regular participant in
      the profits of a freelance trader, without obligation except to
      publicize the stocks of the trader.  Another witness admitted
      that his business was "financial publicity" and that his
      articles were published for the purpose of interesting the
      public in the stock in which he and those who employed him were
      interested, thereby causing the market value of the stock to
      increase, and for his work he was paid by calls and options.
      Still other cases were observed where persons were employed to
      broadcast over the radio, ostensibly as economists tendering
      gratuitous advice, but in reality as publicity agents of
      stock-exchange firms.

S. Rep. 792, 73d Cong., 2d Sess. 8 (1934).

   /14/ Senate Report 21.  These "dangerous potentialities" were
outlined in a memorandum submitted to Congress by the Commission:

      The reason for considering these generalized investment services
      in relation to possible regulation, is to be found in the
      greatly varying types of news, facts, and conjectures that are
      circulated.  Criticism is also prevalent of advertising policies
      which sometimes involve great overemphasis of the value of the
      service supplied and of the profits which can be expected from
      the use of such services.  Then, too, question (sic) may arise
      as to the good faith of some of the less reputable of these
      generalized investment services.

Investment Trusts and Investment Companies:  Hearings on S. 3580
Before a Subcomm. of the Senate Comm. on Banking and Currency, 76th
Cong., 3d Sess. 1008 (1940) (Senate Hearings) (Memorandum entitled
"Statutory Regulation of Investment Counselors," prepared by Research
Department, Illinois Legislative Council).

   /15/ Investment advisory publishers can have a significant impact
on trading in the stock market.  In Capital Gains Research Bureau,
Inc., 375 U.S. at 183, for example, this Court noted that on six
different occasions, an increase in price and trading volume of a
security resulted within days of the publication of a favorable report
on that security.

   /16/ Senate Hearings 1008, quoting Twentieth Century Fund, Inc.,
The Security Markets 692 (1935).

   /17/ The Act excludes from the definition of an "investment
adviser" any "bona fide newspaper, news magazine or business or
financial publication of general and regular circulation." Section
202(a)(11)(D), 15 U.S.C. 80b-2(a)(11(D).  Petitioners do not raise
before this Court the argument rejected by the court of appeals (Pet.
App. A11-A13) that Lowe's publications come within this exclusion.
Amicus American Civil Liberties Union (ACLU), however, does raise this
point (Br. 2-10).  Its argument is without merit.  The ACLU omits any
discussion of the statutory language, basing its argument solely on
portions of the legislative history.  But petitioners cannot come
within the statutory terms:  Lowe's publications are not newspapers or
magazines (see J.A. 78-85), nor are they of general circulation.  This
being so, there is no cause to look beyond the statutory language to
its legislative history.  E.g., United States v. Clark, 454 U.S. 555,
560 (1982).  Moreover, the Commission's interpretation of the
exclusion (see page 50, infra) not to encompass publications such as
petitioners' is entitled to substantial deference.  E.g., Schweiker v.
Hogan, 457 U.S. 569, 588 (1982).

   A number of other factors also compel the conclusion that Lowe's
publications are not within the statutory exemption.  The ACLU's
argument would read Congress's express inclusion of advisers who
provide advice "through publications" (Section 202(a)(11), 15 U.S.C.
80b-2(a)(11)) out of the Act:  if Lowe's publications, which are
purchased for no other reason than to obtain investment advice, are
not within the coverage of the Act, no publication could be.
Moreover, Congress had before it abundant evidence of abuses by
publishers, not merely by personal advisers (see pages 12-13, 15-16,
supra).  It expressly found that "publications" of investment advisers
were cause for regulatory action (Section 201, 15 U.S.C. 80b-1).
Regulation of publications such as Lowe's is fully consistent with the
purpose of the Act.  See SEC v. Wall Street Transcript Corp., 422 F.2d
1371 (2d Cir.), cert. denied, 398 U.S. 958 (1970).  Significantly,
this Court in Capital Gains Research Bureau, Inc. applied the Act to
the publisher of a monthly report sent to 5,000 subscribers, and
approved an injuction requiring certain disclosures by the publisher;
there is no indication in the Court's opinion that the investment
adviser there also provided personal advice (375 U.S. at 182-183).
Had application of the Act to an advisory publisher in Capital Gains
Research Bureau, Inc. rested on a misinterpretation of the exclusion,
Congress would presumably have rectivied it when it passed substantial
amendments to the Act in 1970 and again in 1975, 8 and 13 years after
the Court's decision.  See, e.g., Herman & MacLean v. Huddleston, 459
U.S. 375, 385-386 (1983);  Merrill Lynch, Pierce, Fenner & Smith v.
Curran, 456 U.S. 353, 381-382 (1982);  Lorillard v. Pons, 434 U.S.
575, 580-581 (1978).

   /18/ Senate Hearings 50.

   /19/ See Section 15(b)(7) and (c)(3) of the Securities Exchange Act
of 1934, 15 U.S.C. 78o(b)(7) and (c)(3).

   /20/ Although this "declaration" was deleted from the final version
of the Act, the Court in Capital Gains Research Bureau, Inc.,
explained (375 U.S. at 191 n.34) that it was omitted not "because
Congress had concluded that the abuses had not occurred * * *," but
because Congress wanted "to avoid condemning an entire profession
(which depends for its success on continued public confidence) for the
acts of a few."

   /21/ This authority was in Section 203(d) of the original Act (54
Stat. 851).

   /22/ Senate Hearings 995.

   /23/ Id. at 757.

   /24/ The abuses surrounding publication of investment advice did
not end with passage of the Act.  As one former senior Commission
official noted in 1959:

      The publishers of miscellaneous reports and letters present a
      particularly troublesome problem.  In addition to many
      legitimate services, there appear to be some eccentrics, some
      sensationalists who promise miracles in the market which they
      can hardly deliver, and some out and out tipsters.  Much of the
      Commission's enforcement work under the act has been devoted to
      the latter element.

Loomis, The Securities Exchange Act of 1934 and the Investment
Advisers Act of 1940, 28 Geo. Wash. L. Rev. 214, 249 (1959) (citations
omitted);  see also SEC v. Capital Gains Research Bureau, Inc., 375
U.S. at 181, 183 (describing the recurrent abusive practice by
unethical advisory publishers known as "scalping").

   /25/ Securities Act Amendments, 1959:  Hearing Before a Subcomm. of
the House Comm. on Interstate and Foreign Commerce, 86th Cong., 1st
Sess. 117 (1959).

   /26/ Pub. L. No. 86-750, Section 3(b), 74 Stat. 885.

   /27/ Pub. L. No. 94-29, Section 29, 89 Stat. 167.

   /28/ Among the grounds added by the 1975 amendments were conviction
for specified crimes involving dishonesty and theft or any crime
arising out of the business of a bank, insurance company or fiduciary.

   /29/ Mr. Schenker explained that even though an applicant had
engaged in securities fraud, the disqualification would not be
automatic:

      If they have been convicted in connection with a securities
      fraud, * * * we have the right -- we are not under duty -- after
      considering all the factors, if we think that the public
      interest would be injured, to say that "We will not register
      you."

Senate Hearings 50.

   /30/ Petitioners did not take advantage of their right to seek
review in the court of appeals of the Commission's order in the
administrative proceedings in which Lowe Management's registration was
revoked (see page 4, supra);  nor do they now contend that the
sanction imposed, if constitutional, was excessive in light of Lowe's
past criminal activites.

   Petitioners' argument (Br. 19-20) that the Act vests an
impermissible degree of discretion in the Commission is insubstantial.
 Revocations are authorized only where one of the statutorily
prescribed disqualifications is present.  The requirement that the
Commission also determine that revocation is in the "public interest"
-- a requirement that provides additional prtection to those in
petitioners' position -- does not grant the Commission an undue
quantum of discretion.  See, e.g., NAACP v. Federal Power Comm'n, 425
U.S. 662, 669 (1976);  National Broadcasting Co. v. United States, 319
U.S. 190, 216 (1943);  New York Central Securities Corp. v. United
States, 287 U.S. 12, 24-25 (1932).

   /31/ Should the Court conclude, contrary to our submission, that
the revocation and bar provisions of the Act are unconstitutional, it
should at least uphold, as did the district court (Pet. App. A66), the
requirement that publishers of investment advice register with the
Commission.  See generally Young v. American Mini Theaters, Inc., 427
U.S. 50, 62 (1976);  Buckley v. Valeo, 424 U.S. 1, 60-74 (1976);
United States v. Harriss, 347 U.S. 612 (1954).  And whatever relief
the Court determines is necessary, it should not wholly exempt
advisory publishers from the coverage of the Act -- such a course
would exempt publishers from the operation of the antifraud provisions
(Section 206, 15 U.S.C. 80b-6), which neither petitioners nor amici
claim are unconstitutional as applied to publishers.  Petitioners seek
(Br. 46-47) only a determination that the revocation and bar
provisions (Section 203(e) and (f), 15 U.S.C. 80b-3(e) and (f)) are
invalid as applied to publishers.

   /32/ New York Times Co. v. United States, 403 U.S. 713, 714 (1971)
(per curiam).

   /33/ See Southeastern Promotions, Ltd. v. Conrad, 420 U.S. 546, 559
(1975);  Pittsburgh Press Co. v. Pittsburgh Comm'n on Human Relations,
413 U.S. 376, 390 (1973).

   /34/ Freedman v. Maryland, 380 U.S. 51 (1961), relied on by
petitioners (Br. 20-21), is therefore inapposite.  Petitioners
received the benefit of a hearing before the Commission took action,
and had the opportunity to appeal to the court of appeals (Section
213(a), 15 U.S.C. 80b-13(a)).  Because the Commission's order did not
depend on any particular communications made by petitioners but only
on Lowe's status as one convicted of crimes listed in the Act -- a
status Lowe does not contest -- no additional procedures were required
for an assessment of those communications.

   /35/ For that reason, this Court in Ohralik (436 U.S. at 456) could
point to the "exchange of information about securities" at issue in
SEC v. Texas Gulf Sulphur Co., 401 F.2d 833 (2d Cir. 1968), cert.
denied, 394 U.S. 976 (1969), which involved a press release by a
corporation about a significant corporate development (401 F.2d at
845-846), and the dissemination of corporate proxy statements at issue
in Mills v. Electric Auto-Lite Co., 396 U.S. 375 (1970), as commercial
activity subject to federal regulation, despite the clear impact on
speech of such regulation.  Lowe's investment advisory publications
are subject to the scheme of federal securities regulation to the same
extent.

   /36/ This case is wholly unlike In re Primus, 436 U.S. 412 (1978),
in which professional disciplinary action infringed on protected
political expression.  See pages 40-42, infra.  Rather, it is
controlled by Ohralik, decided the same day as Primus:  Lowe's
asserted "speech" interest is merely in practicing his profession.
This is not sufficient to outweigh the strong public interest in
preventing the harm that could result.

   /37/ Petitioners cite (Br. 18) a number of cases for the
proposition that the states may not revoke the license of a bookstore
or movie theater for prior criminal activity.  See, e.g., Cornflower
Entertainment, Inc. v. Salt Lake City Corp., 485 F. Supp. 777 (D. Utah
1980).  These cases are inapposite because they arise outside the
context of the regulation of a profession, where this Court has long
recognized that the government's right to regulate clearly includes
the power to deny or revoke a professional license for criminal
conduct.  Barsky v. Board of Regents, 347 U.S. at 451.  The fiduciary
relationship between an investment adviser and his client is far
closer, and carries a far greater potential for harm, than the
relation of a theater or bookstore owner to his customers.  The
relationship of trust and confidence inherent in the advisory
relationship enhances the opportunity for fraud and overreaching by
the adviser.  Thus, the Act's provisions, designed to ensure the
adviser's trustworthiness and honesty, are of critical importance.

   /38/ See Pet. Br. 25-29;  Reporters Committee for Freedom of the
Press, et al. (RCFP) Br. 16-20;  ACLU Br. 15-18;  Association of
American Publishers, Inc. (AAP) Br. 12-14;  AFL-CIO Br. 10-15.

   /39/ Amici ACLU (Br. 16) and the AFL-CIO (Br. 13) expressly agree.
The logic of the arguments of the other amici compels a similar
concession.

   /40/ SEC v. Capital Gains Research Bureau, Inc., 375 U.S. at 191,
194.

   /41/ The New York Court of Appeals in Dacey held that the
publication of a book entitled How to Avoid Probate. did not
constitute the practice of law.  The opinion adopted by the court,
however, turned on the particular nature of the legal profession, not
on any broad determination that no profession can encompass
publication.  That opinion reasoned (283 N.Y.S.2d at 998;  emphasis
added):

      There is no person contact or relationship with a particular
      individual.  Nor does there exist that relation of confidence
      and trust so necessary to the status of attorney and client.
      This is the essential of legal practice -- the representation
      and the advising of a particular person in a particular
      situation.

   /42/ Indeed, had the New York State legislature reasonably found
similar abuses in the publication of legal advice and acted to bring
such activities within its regulation of the legal profession, the
court in Dacey presumably would have upheld such regulation under the
First Amendment.  There the court stated (283 N.Y.S.2d at 1000):

      Of course if the exercise of Dacey's right to freedom of speech
      by this publication violates reasonable standards erected for
      the protection of society, or of important interests of society,
      his right would be subordinated for the common good and the
      protection of the whole.

   /43/ Our argument that licensing provisions are permissible in the
context of the regulation of professional activity is not, as amicus
AAP suggests (Br. 13-14), simply a "bootstrap operation." The
determination that the publication of investment advice constitutes
practice of the profession was made by Congress on the basis of the
history of unethical practices in which publishers had engaged to the
detriment of investors and the public.  It is on this determination
that our argument rests, not on a bare use of labels.

   AAP also argues (Br. 20-21) that the Commission's interpretation of
the Act is impermissibly broad because it could require registration
of authors and publishers of books.  This argument is irrelevant to
the regulation of Lowe's newsletters.  In any event, AAP misconstrues
SEC Release No. IA-563, on which it relies.  The release provides
publishers and authors an explicit safe harbor from regulation;  it
does not require registration of all those whose publications fall
outside its terms.  To the contrary, only those who fall outside the
safe harbor and are found, on an individual basis, to come within the
statutory definition of an investment adviser would be subject to the
Act.

   /44/ Many lawyers provide advice in a manner quite similar to an
investment adviser's use of newsletters:  they regularly distribute to
several clients advice based on recent developments in a particular
legal area, without tailoring the advice to each client's individual
needs.  This constitutes the practice of law, and as such plainly
falls within the sort of activity that could be enjoined were the
attorney disbarred.

   /45/ See, e.g., Citizen Publishing Co. v. United States, 394 U.S.
131, 139-140 (1969) (antitrust laws);  Lorain Jouranl Co. v. United
States, 342 U.S. 143, 155-156 (1951) (same);  Breard v. Alexandria,
341 U.S. 622 (1951) (prohibition of door-to-door solicitation);
Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 192-193 (1946)
(Fair Labor Standards Act);  Mabee v. White Plains Publishing Co., 327
U.S 178 (1946) (same);  Associated Press v. United States, 326 U.S. 1,
6-7, 19-20 (1945) (antitrust laws);  Associated Press v. NLRB, 301
U.S. 103, 132-133 (1937) (National Labor Relations Act);  SEC v.
McGoff, 647 F.2d 185, 190 (D.C. Cir.), cert. denied, 452 U.S. 963
(1981) (Securities Exchange Act);  Zweig v. Hearst Corp., 594 F.2d
1261 (9th Cir. 1979) (Securities Exchange Act);  see also Branzburg v.
Hayes, 408 U.S. 665 (1972) (enforcement of subpoenas).

   /46/ The exclusion for bona fide newspapers of general circulation
in Section 202(a)(11) of the Act renders it unnecessary for this Court
to determine whether the Act's provisions may constitutionally be
applied to ordinary newspapers that publish investment advice.

   /47/ See also ACLU Br. 18;  AAP Br. 14-18.

   /48/ Contrary to petitioners' contention (Br. 18;  see also AAP Br.
11), the Commission is not required to prove that any of Lowe's
published advice is fraudulent.  The basis for professional regulation
is the prevention of future harm to the public.  Lowe's past frauds in
connection with his advisory business demonstrate his unfitness and
the likelihood that he will use his publications to resume his
fraudulent practices.

   /49/ ACLU Br. 15-18;  RCFP Br. 29-30;  AAP Br. 10-14.

   /50/ As noted by the court of appeals (Pet. App. A20), Lowe would
not be enjoined from publishing his views on general commercial or
economic matters.  Although some interpretive questions may arise with
respect to whether certain comments relating to the securities markets
constitute "investment advice," it is not unreasonable to require Lowe
to take necessary measures to avoid engaging in prohibited activity.
See, e.g., NLRB v. Gissell Packing Co., 395 U.S. 575, 617, 620 (1969).
 Indeed, because the court of appeals ordered that Lowe be enjoined
only from giving advice with respect to specific securities (Pet. App.
A20), he should have no difficulty in determining what sort of conduct
is prohibited by the injunction.

   /51/ This comports with the flexible approach taken by the Court in
Bolger v. Youngs Drug Products Corp., No. 81-1590 (June 24, 1983),
slip op. 6 (classifying as commercial speech informational pamphlets
that the Court found could not "be characterized merely as proposals
to engage in commercial transactions").

   /52/ Bates v. State Bar, 433 U.S. 350, 363 (1977);  see, e.g., A
Meiklejohn, Political Freedom 79 (1960).

   /53/ Petitioner's publications therefore differ significantly from
the types of speech at issue in First National Bank v. Bellotti, 435
U.S. 765 (1978) (lobbying on tax legislation), and Thornhill v.
Alabama, 310 U.S. 88 (1940) (peaceful labor picketing for a legitimate
purpose), relied upon by petitioners (Br. 19, 22).

   /54/ Petitioners argue (Br. 32-34;  see also RCFP Br. 15;  AFL-CIO
Br. 8-9) that commercial speech is afforded limited First Amendment
protection because it is unlikely that advertising is susceptible to
being crushed by overbroad regulation and because the advertiser can
more readily determine the truth of what is said.  See, e.g., Virginia
State Board of Pharmacy, 425 U.S. at 771-772 n.24;  Bates, 433 U.S. at
381.  Buth neither point provides a reason for determining that
petitioners' publications do not constitute commercial speech.  The
plethora of investment advisory publications currently being published
(see page 36, supra) suggests that the medium is sufficiently hardy to
withstand the modest registration provisions of the Act.  Moreover,
the actual truth of Lowe's statements is not at issue.  Rather, it is
his fitness to practice the profession.  In any event, the cited cases
deal with one type of commercial speech -- product or service
advertising.  Product knowledge and economic incentive are not the
only reason why commercial speech can be regulated.  The more
important reason is its subordinate position and the fear of
devitalization of the First Amendment.  These concerns clearly apply
to investment advice as well as to advertising.

   /55/ See also ACLU Br. 13;  AAP Br. 9.  Amicus ACLU argues (Br. 13)
that, just as this Court did not treat Consumer Reports as commercial
speech in Bose Corp. v. Consumers Union, No. 82-1246 (Apr. 30, 1984),
petitioners' publications likewise should not be considered commercial
speech.  Reliance on Bose Corp. is misplaced.  Bose Corp. addressed
only the proper standard of appellate review of an "actual malice"
determination where the libel rule of New York Times Co. v. Sullivan,
376 U.S. 254 (1964), was applied.  The Court assumed without deciding
that the New York Times rule applied for the purposes of deciding the
narrow issue before it (see Bose Corp., slip op. 26).  The Court
noted, however, that the rule "may seem out of place in a case
involving a dispute about the sound quality of a loudspeaker." Id. at
28;  see also id. at 1 (Rehnquist, J., dissenting) ("It is ironic in
the first place that a constitutional principal which originated * * *
because of the need for freedom to criticize the conduct of public
officials is applied here to a magazine's false statements about a
commercial loudspeaker system").  Thus, the Court did not decide in
Bose Corp. the proper level of First Amendment protection for Consumer
Reports.

   /56/ Thus, even if ordinary consumer-product reports, like
investment advisory publications, were commercial speech, they could
not constitutionally be subject to regulation similar to that imposed
by Congress in the Investment Advisers Act.  As this Court has stated,
"(t)he (regulatory) interference with speech must be in proportion to
the (government) interest served." In re R.M.J., 455 U.S. 191, 203
(1982).  The government's interest in the exchange of information
about ordinary consumer products and services does not rise to the
level of its interest in regulating the exchange of information about
securities.  Because the intangible nature of securities necessitates
greater reliance by investors on the representations of others in
judging their value, the trustworthiness of persons recommending the
purchase of securities is critical.  A further reason why any
governmental interest in regulating publishers of ordinary consumer
reports differs significantly from the government's interest in
regulating advisory publishers is that the investment adviser has a
fiduciary relationship with his clients.  Moreover, even apart from
the potential harm to an adviser's own clients, Congress was properly
concerned with advisory publications because they "occur in such
volume as substantially to affect interstate commerce, national
securities exchanges and other securities markets, the national
banking system and the national economy." Section 201 of the Act, 15
U.S.C. 80b-1.

   /57/ Petitioners do not now claim to fall within the exclusion.  We
address Amicus ACLU's statutory argument at pages 17-18 note 17,
supra.

   /58/ The publisher of an ordinary newspaper lacks the same
incentives and opportunities to engage in abusive securities practices
that are present in the case of advisory publishers.  Moreover,
editorial control over financial writers provides protections not
ordinarily present with respect to advisory publishers.