Opinion ID: 166597
Heading Depth: 4
Heading Rank: 2

Heading: Disclosure of the Amount of Payment

Text: 44 The last question is whether Section 17(b) survives scrutiny to the extent it requires publicists to disclose the amount of consideration they are receiving. Wenger argues that disclosure of an interest ordinarily suffices to put listeners on notice that a publicist's advice may not be trustworthy. 45 In our view, however, by requiring publicists to disclose the amount of consideration they are receiving, Section 17(b) imposes only a de minimis additional disclosure burden on the paid promoter. Telling a listener or reader that the promoter has been bought and paid for, and for how much, directly informs prospective purchasers of the speaker's biases. The listener is free to make an informed investment decision in light of that knowledge. The amount requirement of Section 17(b) is a natural corollary to the disclosure of the speaker's status as a promoter. As such, its satisfies the requirement that there be a reasonable fit between the congressional objective and the statutory command. 46 In addition, Congress has a substantial interest through the securities laws in making capital markets more open and efficient. It 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 the securities industry. Silver v. New York Stock Exchange, 373 U.S. 341, 366, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963); and see L. Auchincloss, The Embezzler (1966) (describing fictionalized 1930's stock promoter). Furthermore, [i]n the eyes of some, the best way to achieve both fairness and efficiency is to give all investors equal access to all relevant information. Dirks v. SEC, 681 F.2d 824, 835 n. 14 (D.C.Cir.1982), rev'd on other grounds, 463 U.S. 646, 103 S.Ct. 3255, 77 L.Ed.2d 911 (1983). In enacting Section 17(b), Congress could reasonably conclude the amount of consideration a publicist receives will influence a rational investor's decision whether to buy or sell a stock, because a publicist's recommendation will be given more or less weight depending on how much he stands to benefit from trumpeting a stock. Therefore, even if Section 17(b)'s requirement that publicists disclose the amount of consideration did impose some burden, such a burden is reasonably related to the government's interest in promoting open capital markets. 47 And as a final matter, the disclaimers at issue here impose little burden on speech. In the context of a half hour broadcast or multi-page newsletter, it takes only a slight effort to tell one's listeners or readers, I have been paid 5.5 million shares of Pan World stock in exchange for putting the company on this show [or in this newsletter]. Appt.App. 58. 48 In sum, Section 17(b) does not violate Wenger's commercial speech rights. It allows publicists to still assert a message while advancing the consumer's interest in knowing the publicists' financial stake in promoting a stock, thereby reasonably advancing the government's interest in preventing deception and achieving more open securities markets. Accordingly, we reject Wenger's First Amendment challenge to Section 17(b).