Opinion ID: 75890
Heading Depth: 2
Heading Rank: 3

Heading: SLUSA is Constitutional

Text: 57 Finally, the plaintiffs argue that SLUSA is unconstitutional because it exceeds Congress' power under the Commerce Clause. 17 We readily disagree. 58 The Supreme Court has identified three categories of conduct that Congress may regulate under the Commerce Clause: (1) the use of the channels of interstate commerce; (2) the instrumentalities of interstate commerce, or persons or things in interstate commerce; and (3) activities that substantially affect interstate commerce. United States v. Lopez, 514 U.S. 549, 558-59, 115 S.Ct. 1624, 131 L.Ed.2d 626 (1995). Within each category, Congress' regulatory power is plenary. Id. SLUSA regulates only national securities markets and expressly deals with claims pertaining to nationally-traded securities. As the district court recognized, both the securities in question and the defendant in this action are entrenched in interstate commerce. SLUSA defines a covered security as a security issued by an investment company that is registered, or that has filed a registration statement, under the Investment Company Act of 1940. The Growth Fund shares in this case are federally-registered securities and Merrill Lynch's trading operations for Growth Fund shares extend throughout the country. SLUSA thus is constitutional because it regulates both channels of interstate commerce ( i.e., national securities markets) and things in interstate commerce ( i.e., nationally-traded securities themselves). Indeed, though it has addressed the 1933 and 1934 securities Acts on countless occasions, the Supreme Court has never invalidated any part of either statute (which SLUSA amended) — or for that matter, any federal statute regulating the national securities markets — on Commerce Clause grounds. See e.g., North Am. Co. v. SEC, 327 U.S. 686, 696, 66 S.Ct. 785, 90 L.Ed. 945 (1946) (rejecting Commerce Clause challenge to Section 11(b)(1) of the 1933 Act because it is long established that Congress may deal with and affect the ownership of securities in order to protect the freedom of commerce).