Document: 401 U.S. 617 91 S.Ct. 1091 28 L.Ed.2d 367 INVESTMENT COMPANY INSTITUTE et al., Petitioners,v.William B. CAMP, Comptroller of the Currency, al. NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., Petitioner, v. AND EXCHANGE COMMISSION Nos. 61, 59. Argued Dec. 14 and 15, 1970. Decided April 5, 1971. Syllabus Petitioners in No. an association open-end investment companies several individual such companies, attack (1) portions Currency's Regulation 9, purporting to authorize banks operate collective funds, as violative Glass-Steagall Banking Act 1933 (2) Comptroller's approval given First National City Bank a fund. Petitioner 59 seeks review Securities Exchange Commission (SEC) order exempting that fund from certain provisions Investment Company 1940. The District Court concluded 61 challenged 9 were invalid. Appeals, after consolidating cases, held SEC's actions consonant with relevant statutes, affirmed reversed Court. Held: 1. do not lack standing challenge whether national may legally enter field competition them. Association Data Processing Service Camp, 397 150, 90 827, 25 184. Pp. 620—621. 2. operation kind approved by Comptroller, is direct mutual industry, involves bank underwriting, issuing, selling, distributing securities violation §§ 16 21 Act. 621—639. 420 F.2d 83, judgment vacated G. Duane Vieth, Washington, D.C., for petitioners Co. Institute, others. Daniel M. Friedman, respondent William Currency. Joseph Levin, petitioner Assn. Dealers, Inc. Archibald Cox, Bank. United States, amicus curiae, special leave Mr. Justice STEWART delivered opinion 1 These companion cases involve double-barreled assault upon efforts go into business operating are companies. They brought action States Columbia, attacking issued Currency,1 on ground this Regulation, establish sought permit activities prohibited or their affiliates various 1933, 48 Stat. 162.2 also specifically attacked application New York permission In Dealers filed petition Appeals Columbia Circuit seeking partially exempted 1940.3 2 invalid under Act.4 appealed decision, appeal was consolidated taken fully statutes committed regulatory supervision. Accordingly, it Court.5 We granted certiorari consider important questions presented federal statutes.6 For reasons follow, we hold insofar authorizes sale interests type established pursuant approval. This disposition makes unnecessary propriety affording exemption 3 * urged at outset question contention foreclosed There offered data processing services general community had seek judicial ruling could make available other customers. sufficiently injured authorized creata case controversy. injury instant indistinguishable. Congress did intend 'to preclude administrative rulings legitimate scope (the Act).' U.S., 157, S.Ct., 832. precisely have case. Finally, arguably legislated against challenge, which flowed injury. noted indeed merits. discussion follows balance deal merits petitioners' contentions conclude legislate challenge. can be no real question, therefore, light See Arnold Tours 400 45, 158, 27 179. II 4 issue before us Currency may, consistently banking laws, offer its customers opportunity invest stock created maintained bank. Before 1963 regulation offering service. Board Governors Federal Reserve System until 1962 jurisdiction over all trust banks, allowed assets only 'the funds true fiduciary purposes.' applicable regulation, F, specified Common Trust Funds trusts than strictly purposes hereby prohibited.' ruled improper use 'a Fund attracting money alone embark what would effect participations public investments.' 26 Fed.Reserve Bull. 393 (1940); see 42 228 (1956); 41 142 (1955). 5 transferred most without modifying any provision substantive law. Pub.L. 87—722, 76 668, 12 U.S.C. § 92a. thereupon solicited suggestions improving regulations activities. Subsequently, new proposed expressly monies management, so-called managing agency accounts. officially promulgated changes material here.7 1965 submitted plan promptly plan, now operation. departs some respects envisaged expected, briefs tell us, model decide service.8 6 Under customer tenders between $10,000 $50,000 bank, together authorization making customer's agent. added fund, written evidence participation expresses 'units participation' proportionate interest assets. Units freely redeemable, transferable anyone who has executed agreement registered company underwriter fund's units within meaning registration statement 1933. supervised five-member committee elected annually participants extent majority affiliated expected always will officers bank's division.9 actual custody carried out advisor management agreement. Although requires committee, including unaffiliated members, participants, continue advisor. III 7 Section amended, 24, Seventh, provides 'business dealing (by bank) shall limited purchasing selling recorse, solely order, account of, customers, own *. Except hereinafter provided otherwise permitted law, nothing herein contained purchase (a shares corporation.'10 contend section. 8 'shall underwrite stock.' And same Act, 378(a), 'it unlawful—(1) person, firm, corporation, association, trust, similar organization, engaged distributing, wholesale retail, through syndicate participation, stocks, bonds, debentures, notes, securities, engage time whatever (deposit banking).' creation offers constitutes stocks these sections. raised novel substantial. powers 1913. 11, 38 261. first common organized 1927, F 1937. Report Commingled Administered Banks Companies, H.R.Doc.No.476, 76th Cong., 2d Sess., 4—5 (1939). least generation, there been reason doubt can, commingle one hand, act agent other. No law suggests pool assets, But union gives birth whose different character. differences conventional subtle best, undisputed finds itself industry. One suppose consists buying 'for account' 'issuing' 'selling' 'stock' 'other securities' evidencing undivided redeemable fund.11 On face, appear clearly prohibit activity banks.12 10 cannot come lightly conclusion violates laws. It settled courts should give great weight reasonable construction statute adopted charged enforcement statute. laws warrants invocation principle respect his deliberative conclusions Missouri, 263 640, 658, 44 213, 215, 68 L.Ed. 486, 493. 11 difficulty here articulated position level impact they affect funds. accompanying statement. His subsequent report advert prohibitions 101st Annual 14—15 (1963).13 To sure, counsel course litigation oral argument Court, rationalized basis professional competence. hardly tantamount interpretation 21. Burlington Truck Lines 371 156, 83 239, 207, said, 'The accept appellate counsel's post hoc rationalizations substitute discretion (agency) incompatible orderly functioning process review.' Id., 168—169, 246. delegated official responsibility elaborating enforcing statutory commands. possesses expertise enlighten rationalize search intent Congress. Quite obviously grant authority he satisfied exercise violate If faces acted, substantial danger momentum generated initial seriously impair enacted. IV dispute objectives commercial receive deposits subject repayment, lend money, discount negotiate promissory notes like, going business. Many indirectly when passed Even passage generally believed directly.14 1908 began practice establishing security in, inter alia, floating bond issues and, less frequently, underwriting issues.15 confirmed directly, addition made affiliation organization so illegal. abolish banks.16 13 apparent legislative history why felt drastic step necessary. failure 1930 widely attributed numerous affiliates.17 Moreover, concerned member particular both aggravated damaged market decline partly because indirect involvement trading ownership speculative securities.18 reflected determination policies competition, convenience, might support entry outweighed 'hazards' 'financial dangers' arise proscribed Act.19 hazards mind obvious frozen imprudent investments. often operated access frequently capital paid stockholders, public, allocation legal dividend purpose.20 shows repeatedly focused more goes beyond acting enters either directly affiliate sell places promotional pressures turn create temptations. example, closely associated mind, fare badly, confidence impaired. since essential solvency exist natural temptation shore up unsound loans aid.21 pressure successful risk credit facilities those invested become involved. feared even far companies.22 event, thought salesman's ability function impartial source credit.23 15 depositors suffer losses investments purchased reliance relationship affiliate.24 loss good 'become handicap during major period deflation.'25 More broadly, needs lead reputation prudence restraint enterprise done being undercut risks necessarily incident business.26 perceived demands banking, tempted expectation loan facilitate securities.27 much feed fever late 1920's.28 Senator Glass plain fixed purpose Congress' diverted operations aggressive character business.29 Another potential hazard very arose conflict banker obligation render disinterested advice. Bulkley stated: 17 'Obviously, better qualified advice disinterestedly regard diligently safety uses list savings department distribute circulars concerning advantages this, that, originating profit distribution combination profits.'30 18 driven unload excessive holdings sponsor bank.31 Some witnesses hearings expressed view constituted self-dealing trustee's loyalty, anything affiliate.32 19 sum, acted keep largely incentives banker's pecuniary stake success opportunities destructive prudent system. As put it: 20 'If want service service, additional profits something must business.'33 V language chose achieve includes stock' corporation,' prohibition engaging securities.' takes consistent provisions, participating 'securities' argued simply small investor benefit large investors, creates problems present whenever invests 22 phrasing narrow reading word 'securities.' contrary, breadth term implicit fact antecedent encompasses equity but representing debt. certainly suggest buying, holding, distinguished industrial enterprise. 23 Indeed, contemplated 'security' product conducted Senate Resolution 71 included among topics investigated system formation trusts.34 subcommittee found trust: 'buying acquired purely purposes.'35 Since intended divorce kinds engaged, believe explicitly trust.36 24 But, persuaded enacted room From perspective expertise, arguments allowing determined outlined above necessary banks. Those undertakes A operates sell. matter indifference buys investment. lose fee in. accounts enought qualify greater if placed rather individually selected costs economies scale. mechanics pressure. When redeemed, effectively faced choice portfolio cover redemptions. incentive choose latter avoid cost transactions undertaken redemption purposes. Promotional circumstance point investor, comparable show prospective attractive performance resulting fees. squarely behind offered. conservative speculative, event record. Imprudent unsuccessful bring about perhaps unjustified itself. place distress, find rescue measures inconsistent sound banking. incidental words, abuses guard affiliates. slightest reflection integrity industry say traditions nearly approximate primarily engaged. puts accommodation rules firmly prudently mixed 29 eliminate distort decisions invested. exploit confidential creditors undertake, indirectly, aid best depositors. divert talent resources promotion decision—the decision fund—the motivation recommendation badly unlikely disenchantment threaten dependent unreal. 30 received activities, unlike rise investment; aggressively promoted companies; entail threat itself; short, difference investments.37 VI 31 prophylactic measure directed conditions experience 1920's showed potentials abuse. literal terms prevent here. Because flow basic almost 40 years ago, apply written. reverse vacate 32 ordered. 33 Judgment vacated. 34 THE CHIEF JUSTICE took part consideration cases. 35 HARLAN, dissenting. 36 holds Institute competitor 'arguably injury.' ICI, says entitled prevail 'Congress challenge.' Ante, 620, 621 (emphasis added). I understand mean 'legislated competition' entering endeavor, stemming competition. ante, 631, 634, 636—638. However, phrase protect class competitive for, three judges court below agreed, neither pertinent nor evidences congressional concern others like them freedom competition.1 appears reasonably anything, despite anticompetitive effects Cf. 630, 636. 37 case, Hardin Kentucky Utilities Co., 390 1, 5—6, 88 651, 654, 787, 792—793 (1968), point: 'This has, true, economic results lawful cannot, itself, confer legality aspect competitor's operations. Railroad Ellerman, 105 166, 1015 (1882); Alabama Power Ickes, 302 464, 58 300, 82 374 (1938); Tennessee TVA, 306 118, 366, 543 (1939); Perkins Lukens Steel 310 113, 60 869, 84 1108 (1940). constitutional requirements plaintiff enforce way protecting contrast, rule, Chicago Junction Case, 264 258, 317, 667 (1924), invoked does reflect interest, require compliance provision.' 39 Organizations 184 (1970), 179 opposite result suggested Hardin. aside 'case-or-controversy' here, crucial 'whether protected complainant arguable zone regulated guarantee question.' 153, 830. That resolved favor processors '§ (of Corporation Act) brings it.' 831.2 observed again '(n)otheing (Data Processing) competitors data-processing field.' 46, 159. Plainly provide little Court's competitors, such, well. holding—that prasons relating then observance prohibition—has surface appeal, but, see, analytical basis. Certainly none me our prior decisions, particularly Hardin, action. While foreclose possibility further modified respect,3 reexamine them, deem inappropriate single Justice. take reach rule Like BLACKMUN, post, 645, lengthy topic superfluous. At increasing two number seats open five-man serves board directors account.4 Substantially below, 136 U.S.App.D.C. 241, 249—253, 266, 95, 108, am abuse determining facts appropriate dispensing power vested 80a—6(c). herein, affirm judgments review. 43 seems me, based deemed desirable policy four decades ago. thing wise safeguards provided, existing somewhat ancient legislation result. Policy considerations 45 recognize aware factors led enactment second third century happiest chapter American Deep concerns emerged distressful experiences sad ends practices then-prevailing conditions, history, remedy prompt investment, contrasted commercial, acquiring account. sins time. 46 propriety, however, acting, contravention state local vivos testamentary trustee, executor administrator, guardian custodian indeed, Carcaba McNair, 795, 797 (CA5 1934), cert. denied, 292 646, 54 780, 78 1497, not, be, questioned so, is, element illogic ready admission concerned, manage, arrangement, technical sense, administer separate accounts, rejection, placing draws decisional line two. impossible locate root drawing. tool distinction think, fundamental misconception 47 convinced Congress, otherwise, yet endeavors highly field. None convinced, concedes. privilege prohibiting desire. Parts outlines indulges states, last paragraph Part V, capacities, like. disagree. exactly present. atmosphere vigorous need observe current continuous advertising claimed skills know profit. area concepts non-banking fiduciaries. Failure misadventure constitute beneficiaries, trustors, inevitable adverse fulfillment fashionably described today 'full service.' Thus feel overstates diminish significance After all, akin traditional device already 49 What decries operations, each concededly permissible: customer, pooling said powers' 'of character' statutorily prohibited. powers, controlling somehow produce forbidden unitization mere sum parts thereby expands offensiveness 50 With my minority one, detailed issue, 59, Commission, Suffice accord views respective opinions 91—95, particular, Chief Judge Bazelon carefully examined 'danger zones' considered SEC protections erected concurred Commission's judgment. I, too, arbitrarily exceed deserves 51 Appeals. CFR Pt. (1970). codified sections scattered Title Code. response 6(c) 802, 80a 6(c). 274 F.Supp. 624. 83. 986, 1114, 394. 9.18(a) that: 'Where collectively: (3) exclusively reinvestment contributed thereto capacity providing *.' receives investor's trust. dissent Commissioner Budge unofficially reported CCH Fed.Sec.L.Rep., 1964—1966 Decisions, 77,332. 16, 1935 Amendments clear buy S.Rep.No.1007, 74th 1st 17; H.R.Rep.No.742, 18. company. 1940 defines 'issuer' 'any security' 'is investing 80a—2(a)(21), 80a—3(a) (1). An 'which outstanding issuer.' 80a—5(a)(1). 'unit trust': which, things, contract represents unit 80a—4(2). 377, prohibits affiliations members organizations 'engaged principally flotation, sale, retail 32, 78, officer, director, employee serve de- scribed 20. conceived entity distinct occasion 218.111 concluded, 'general principles developed section 32,' 'constitute entity,' 'would regarded arm bank.' called attention summarized forbidding firm receiving deposits, exceptions.' Board, declined express applicability carry criminal penalties. Nor Board's rational. bears name. effective control characterize disserve limitations refers 'public sale' while proscribes securities. article Saxon Deputy Miller inapplicable & Miller, Funds, 53 Geo.L.J. 994 (1965). predicated 1936 tax 584, purposes, consequently assumed proscribe applicable. 1008—1010. Whatever argument, bearing litigation. 584; qualify. advanced brief behalf noteworthy 584 'maintained moneys executor, (Emphasis added.) language, reference contributions agent, identical 1940, 80a—3(c)(3). commingled Statement Cary, Hearings Funds—Overlapping Responsibility Conflict Subcommittee House Committee Government Operations, 88th (1963). Pursuant S.Res. (hereafter 1931 Hearings), 71st 3d (1931); 1920 quoted id., 1067, 1068. Glass, commenting earlier legislation, 'We tried to, had, removed possible influence market.' 262. 1052. Trusts pt. 2, H.R.Doc.No.70, 116—117, 1017, S.Rep.No.77, 73d 6, 8, 10. 18; 365; 75 Cong.Rec. 9911 (remarks Sen. Bulkley). 41, 192, 1056; 1067. Hearings, supra n. 14, 20, 237, 1063. 1058, where said: 'Activities holding finance fraught deflation period. tendency borrowed independent identity prevails tends encourage lending former.' 1064; 9912 87 Chairman Glass). 77 4028 Rep. Fish). 1064. 9912: 'And although possibly impairment institution owning whole transaction discredit depositors.' (Remarks Bulkley.) 9—10. 1006—1029; 8—9. 9884. 8: development prepanic appearance loans, overinvestment kinds. situation changing problem overemphasized. never undertake scale, tenor away recognition growth direction legitimate.' vein Representative Steagall 'Our original bill call back agriculture commerce designed framers Act.' 3835. 9912. 237; cf. 311. 71, reprinted 1057. 307. supra, (1940), 1094. 'It equally giving broadest embellishing meant bestow Appellees protection 263, (Burger, J., joined J.) (footnote omitted); 254, 256—258, F.2d, 96, 98—100 (Bazelon, C.J.). Barlow Collins, 159, 164, 832, 836, 198 suggestion effect, Jaffe, Standing Again, Harv.L.Rev. 633 (1971). By virtue 'person party aggrieved' 80a—42(a), supporting petitioner's

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