Court Opinion

ID: 9464457
Source: CourtListenerOpinion
Date Created: 2023-08-04 23:33:45.188216+00
Date Added: 2024-06-11T17:38:38.297920
License: Public Domain

GURFEIN, Circuit Judge,
concurring and dissenting:
I concur in the affirmance of the dismissal of the § 10(b) claim.
With great respect for my brother Timbers as a master of securities law, I must respectfully dissent from the holding that, under this complaint, we should imply a private right of action at law for damages for alleged violation of § 206 of the Investment Advisers Act, 15 U.S.C. § 80b-6 (“Advisers Act”) by these limited partners of a speculative hedge fund.1
According to the majority, the issue in this case is whether to imply a private right of action. It therefore draws an analogy to other securities act provisions under which private rights of action have been implied. It seems to me, however, that the issue is rather whether a private action at law for damages should be implied. With reference to that issue, I think that the Investment Advisers Act differs significantly from the securities statutes upon which the majority draws for support.
The legislative history of the Advisers Act indicates that it was a tentative attempt to effect a “compulsory census” of investment advisers by requiring registration rather than to provide a full regulatory scheme. David Schenker, representing the SEC, testified in the Senate Hearings:
Therefore, our fundamental approach to this problem is in the first instance, before we could intelligently make an appraisal of the economic function or of the abuses which might exist in that type of organization, to see if we could not get something which approximated a compulsory census. Fundamentally that is the basic approach of title 2. [The Advisers Act]. We first would like to find out how many people are engaged in this business, what their connections are, what is the *880extent of their authority, what is their background, who they are, and how they handle the people’s funds” (emphasis added).
Hearings on S. 3580 before the Subcomm. of the Senate Comm, on Banking & Currency, 76 Cong., 3d Session 48. See also S.Rep. No. 1760, 86th Cong., 2d Sess., U.S.Code Cong. & Adm.News 1960, p. 3502. There are other indications that “as enacted, the Investment Advisers Act represented a compromise between the SEC and the investment advisory industry.” See Note, Private Causes of Action Under Section 206 of the Investment Advisers Act, 74 Mich.L. Rev. 308, 319-30 & n.69 (1975).2 It is in light of this cautious approach taken by Congress in enacting the Advisers Act as tentative legislation that Section 214, the provision which appears to allow only suits in equity, should be read.
Section 214 is unlike the corresponding sections in the other Acts. As my Brother Timbers notes, the Advisers Act gives the district courts jurisdiction, concurrently with state courts, only “of all suits in equity to enjoin any violation of this subchapter or the rules, regulations, or orders thereunder.” The other Acts, by contrast, provide jurisdiction not merely over “all suits in equity,” but also over “actions at law brought to enforce any liability or duty created thereby, or to enjoin any violation of this subchapter, or the rules, regulations or orders thereunder,” e. g., Investment Company Act of 1940, § 44, 15 U.S.C. § 80a-43, an act passed together with the Advisers Act in a single bill.3 For similar language in other Acts, see majority opinion p. 874, n.20.4
The attempted withholding of jurisdiction over actions at law in the Advisers Act indicates that Congress was not intending to provide for any liability beyond injunctive relief.5 As Mr. Justice Powell noted in Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 756, 95 S.Ct. 1917, 1935, 44 *881L.Ed.2d 539 (concurring), “[t]he starting point in every case involving construction of a statute is the language itself.” The majority opinion explains that the language of § 214 differs from the language of the jurisdictional sections in every other Securities Act because “each of the other Acts whose jurisdictional provisions refer to ‘actions at law’ contains one or more sections expressly granting injured parties a private right of action for damages,’ ” and hence, required the jurisdictional provision for that reason.6
But the more cogent question is why the Advisers Act, as distinguished from every other securities act, does not provide for any express civil liability in damages. The majority offers no explanation for such an omission which must have been a studied omission. I think it is highly relevant that in each of the other Acts Congress itself did provide for some express civil liability, yet under the Advisers Act it failed to include a single section imposing liability for damages. Congress, for example, could have provided an express damage remedy for misrepresentations in the registration statement of the advisers as it did for misrepresentations of the registration statement of the underwriter, 15 U.S.C. § 77k(a)(5). This indicates rather that, in its cautious approach to the regulation of investment advisers, Congress was not yet ready to impose any civil liability for damages.
The majority holds, nonetheless, that a private damage action should be implied in this case “to implement the statute’s underlying purposes.” It notes that persons relying upon investment advisers for advice, for whose “especial benefit” the Act was adopted, see Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 45 L.Ed.2d 416 (1975), will benefit from a private damage action. Ante, pp. 872-873 citing SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 186-91, 84 S.Ct. 275, 11 L.Ed.2d 237 (1963).7 Such reasoning it seems to me has become somewhat outmoded in the light of the current standards of interpretation announced in Cort v. Ash, supra. The four factors men*882tioned in Cort v. Ash are not mere surplus-age to the theme that the beneficent purpose of the legislation is, by itself, sufficient warrant for the implication of a claim for private relief.8 Such a single criterion is also inadequate because a statute can have more than one “beneficent purpose” — here, to protect investors but also to avoid undue disruption of the investment advisory industry. To put it another way, Congress may intend a statute to protect investors — but not necessarily without limit. Countervailing considerations may result in something less than an imposition of civil liability for money damages. The majority opinion ignores this problem of statutory construction, in my view, because it gives insufficient weight to the second factor listed in Cort: “is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one?”9 As shown above, there is implicit legislative intent to deny such a remedy.10
The majority urges that there is no evidence that Congress intentionally sought to preclude private damage actions. Ante, p. 874. But there is surely no “clear evidence” that Congress affirmatively intended private actions for damages to lie for violation of § 206. And we have been instructed recently in National Railroad Passenger Corp. v. National Ass’n of Railroad Passengers, 414 U.S. 453, 458, 94 S.Ct. 690, 693, 38 L.Ed.2d 646 (1974) (“Amtrak”) that “ ‘when a statute limits a thing to be done in a particular mode, it includes the negative of any other mode,’ ” quoting Botany Mills v. United States, 278 U.S. 282, 289, 49 S.Ct. 129, 72 L.Ed. 730 (1929). Section 214 expressly confers jurisdiction over suits in equity only, and the Act as a whole does not provide anywhere for actions at law. Under the Amtrak formulation, when Congress limits relief to equitable relief, “it includes the negative of any other mode”— monetary liability. In Amtrak Mr. Justice Stewart observed that, in determining whether a private action would lie, this rule of statutory construction should yield only “to clear contrary evidence of legislative intent,” 414 U.S. at 458, 94 S.Ct. at 693, a situation that does not exist in the case of the Advisers Act.
Similarly, in Securities Investor Protection Corp. v. Barbour (“SIPC"), 421 U.S. 412, 95 S.Ct. 1733, 44 L.Ed.2d 263 (1975), Mr. Justice Marshall noted that where there is express statutory provision for one form of proceeding, this “ordinarily implies that *883no other means of enforcement was intended by the Legislature,” 421 U.S. at 419, 95 S.Ct. at 1738, again emphasizing that the implication would yield only to “clear contrary evidence of legislative intent.” I think that my brothers turn this test backwards. And as we have seen, there are strong reasons for believing that not only is there no “clear contrary evidence of legislative intent” but rather that whatever evidence exists looks the other way.
That a statute explicitly provides for private rights of actions in some sections does not, of course, preclude the implication of other actions under different sections of the same Act. J. I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423 (1964); see 6 L. Loss, Securities Regulation, 3869— 73 (Supp.1969). Cf. 1 A. Bromberg, Securities Law: Fraud § 2.4(1) (1975); Note, Private Rights of Action Under Amtrak and Ash: Some Implications for Implication, 123 U.Pa.L.Rev. 1392, 1419-20 (1975).11 But the Advisers Act is a statute which completely omits any damage actions whatever, even though otherwise analogous statutes do not. To find a negative implication in such a case is more than a mechanical rule of construction. For while under the Securities Act the failure to include express remedies for each substantive section probably is due to considerations not relevant to the implication question, see Note, supra, 123 U.Pa.L.Rev. at 1419-20, the failure to include any provision for damage remedies in the Advisers Act is best explained by reasons of policy which Congress deemed sound, and which would actually be undermined by the implication of a private damage action.
The Advisers Act was passed in 1940, almost four decades ago. It was designed as a threshold attempt to effect a compulsory census of investment advisers, and not as a pervasive regulatory scheme. In all these years no litigant has urged to a Court of Appeals that Section 206 of the Act is a basis for a private damage action.12 The majority opinion suggests that when the Act first became law in 1940, Congress gave no thought to the possibility of a private right of action against investment advisers, and finds this to be an argument in favor of implication, as we have seen. The court ignores the circumstance, however, that when Congress passed the 1970 amendments, Public Law No. 91-547, 84 Stat. 1413, it specifically addressed itself to the civil liability of investment advisers. When it did, it limited that liability (a) to investment advisers who advise investment companies and no others, and (b) only to the extent of a breach of fiduciary duty concerning compensation for services or like payments. Investment Company Act § 36, 15 U.S.C. § 80a-35. See Galfand v. Chestnutt Corp., 545 F.2d 807 (2d Cir. 1976). The implication is clear that Congress did give specific attention to investment advisers, but decided not to impose civil liability on those investment advisers who were not advisers to investment companies.
It is significant also, I think, that when Congress made a thoroughgoing revision of the Advisers Act in 1960, it failed to create a single express liability nor did it amend Section 214 to include actions at law.13
*884And in the 1970 amendments, Congress indicated that when it wanted to do so, it expanded the statutory relief available in the companion Investment Company Act, § 36, 15 U.S.C. § 80a-35, by providing that a court may “award such injunctive or other relief.” “Other relief” was added. See Moses v. Burgin, 1 Cir., 445 F.2d 369, 373 n.7. In addition, the recently concluded Congress had before it an amendment proposed by the Securities and Exchange Commission providing for a private damage action under the Advisers Act. It does not appear seemly to me, unless we are' under an absolute compulsion to do so, suddenly to create such a claim for relief by judicial legislation, without the ability to define the outer limits of such a claim.
Congress is uniquely able to set the limits of any civil action for damages. That this is so is emphasized by the majority opinion on this very appeal. It holds that the 10b-5 claim is without merit, yet on the same factual allegations it supports a § 206 claim. In so doing, it circumvents the sound policies behind the restrictions on 10b-5 claims.
Thus, for example, the 10b claim is held to have been properly dismissed because, as my brother Timbers tells us:
“They [plaintiffs] say that they would have withdrawn from the firm in 1968 if defendants had not misrepresented the true nature of the firm’s investment at that time. The short answer to this branch of plaintiff’s argument is that the requirement of fraud in connection with the purchase or sale of a security is not satisfied by an allegation that plaintiffs were induced fraudulently not to sell their securities. Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 737-38, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975)” page 868 (emphasis in original).
I am not sure that Blue Chip is so limited in its application. I think that the underlying concern in Blue Chip, though standing was involved, was not the lack of a technical “purchase or sale,” which ingenuity might have supplied, see 9 Cir., 492 F.2d 136, but, perhaps, the sheer inability to disprove what a plaintiff says he would have done if he had but known the truth. This problem is as acute in suing investment advisers as in suing offerors, perhaps even more acute in the former situation. There is a distinct danger that, by implying an open-ended private right of action, the court is giving the clients of investment advisers carte blanche to convert themselves from victims to defrauders. Judge Hufstedler said it well in her excellent dissenting opinion below in Blue Chip Stamps, 492 F.2d at 148:
“The passive investor could always await market developments without any risk, claiming deception caused nonbuying if the value of the securities proved more promising than the offeror’s glum predictions and deception caused nonselling if a rosier prospectus was followed by a market decline.”
In this very case the plaintiffs received profits from the restricted letter stock and waited almost a full year until the market became unfavorable before seeking redemption of their shares.14 They deliberately entered into a partnership that was going to operate in the most speculative of investment activities. They gave the general partners the power to invest in any kind of security, to sell short and cover both securities and commodities, to buy and sell options and to cover, to play the commodities market, to buy on margin, to lend money to *885partners without security, and to pledge partnership assets for loans. See note 1, supra. Even a babe in the woods would know that he was giving his money to the general partners for discretionary speculation. The purchase of unregistered stock, far from being unforeseeable, fits quite well into this plan. For, in a rising market, well-selected investment letter stock can prove profitable, and established investment bankers handle such securities on an “investment letter” basis. Given the purposes of the hedge fund and the broad powers vested in the general partners, it is hardly likely that the plaintiffs were interested in evaluating the portfolio themselves. Indeed, the plaintiffs never asked for a list of the securities held by the partnership.
The complaint does not allege self-dealing, conflict of interest, or conversion of assets, any of which would be actionable under § 10(b), if in connection with the purchase or sale of securities. See, e. g., Bird v. Ferry, 497 F.2d 112 (5th Cir. 1974) (conversion by salesman). To the contrary, it shows that defendants themselves invested their own money and the money of their families, and there is no allegation that they withdrew it. The plaintiffs prospered under this management for a considerable time when the market was good, reaping profits from the investment of unregistered securities — letter stock as well as other securities in the common portfolio. Having joined the partnership as early as 1965, they undoubtedly basked in the euphoria of the bull market described by Judge Friendly in Levine v. Seilon, Inc., 439 F.2d 328, 335 (2d Cir. 1971). Conversely, however, when the market turned down, it turned down for all including the defendants.15
This practical consideration indicates to me, not, as it is suggested in the majority opinion, that the plaintiffs should not be given a chance to prove their case, see footnote 22a, but that, in the absence of a legislative determination of the policy questions involved, we are treading on dangerous ground in implying a private action under § 206 on the fact pattern alleged here, and ought instead to leave the issue to Congress. To create an analogue to Section 10(b) without the requirement that the “fraud” be “in connection with the purchase or sale” of a security hardly gives broad effect to the policy considerations so clearly expressed in the majority opinion of the Supreme Court in Blue Chip Stamps and in Mr. Justice Powell’s concurring opinion, as well as Judge Hufstedler’s dissent in the Court of Appeals. The majority specifies no limits to the civil liability under § 206 which it is in the process of creating over this dissent. Yet, it is simply extending 10b-5 by resort to a different statute. As the Court said in Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 1389, 47 L.Ed.2d 668 (1976), “We would be unwilling to bring about this result absent substantial support in the legislative history, and there is none.” We do not know, if Congress creates an express private cause of action for damages under § 206, that it will not limit the right as it did with respect to § 10(b), by imposing a purchase or sale requirement, and perhaps also by defining the measure of damages and enacting a separate statute of limitations.16
*886The Commission, in its amicus brief, argues for an implied civil right of action for damages, on the ground that “the claim asserted by plaintiffs herein is not one that would test the outer limits of the cause of action created by the antifraud provisions of the federal securities laws.” (Emphasis added). But what are the limits to what is essentially a Rule 10b-5 action, if not the prerequisite that the claim relate to the “purchase or sale of a security”? Implying a claim for relief without limitation will encourage actions against investment advisers for poor judgment, disguised by pleadings subtly implying fraud and deceit. The unfounded allegation itself, contrary to the solicitude originally expressed by the SEC itself, will spell grief for the investment adviser, and the expense of defending the action will often compel settlement.17 Each consideration is a policy ground that should be weighed. See Blue Chip Stamps, SIPC, and Amtrak. Indeed, in its early days the SEC itself was vitally concerned with these considerations militating against public disclosure.18 This belies any intention by Congress to open wide private civil complaints which, in the nature of our adversary proceedings, become public property at once.
The blackmail effect of allowing customers to sue investment advisers for damages for what the customer might have done if he had but known, seems obvious for the reasons so well stated by Mr. Justice Marshall. The customer has ample relief under § 10(b), for misrepresentations made by the investment advisers in the process of getting him into the adviser’s fund.19 And if Congress wishes to go further, it can do so.
*887Since my brethren wish to create a new implied right of action, I have given my reasons for dissenting from their view. As indicated, I concur in the dismissal of the § 10(b) claim, but would carry over some of the reasoning to dismiss the asserted claim under § 206 as well.

. The Hedge Fund partnership agreement gave the general partners the following powers:
"(a) To purchase, hold and sell stocks, bonds and other securities; (b) to sell stocks, bonds and other securities short and to cover such sales; (c) to purchase, hold, sell and otherwise deal in put and call options and any combination or combinations thereof; (d) to purchase, hold, sell, sell short and cover, and borrow from brokers for that purpose, commodity contracts and to purchase, hold, sell and otherwise deal in commodities generally dealt in on commodity or produce exchanges, provided, however, that Partnership funds used for the purpose of dealing in commodities and commodity contracts shall not exceed at the time of any purchase or commitment ten (10) percent of the net worth of the Partnership at July 1, 1965 or at the beginning of any calendar year thereafter, as the case may be; (e) to conduct margin accounts with brokers; (f) to open, maintain and close bank accounts; (g) to sign checks; (h) to pledge securities for loans; (i) to engage in the business of advising and counsel-ling on investments and to enter into agreements therefor; and (j) generally, to act for the Partnership in all matters incidental to the foregoing.”
The original partnership agreement was amended twice, but the amendments did not affect the management’s broad discretionary powers.

. See p. 880 & n. 3 infra.

. It seems to me of some significance that early drafts of the Advisers Act, including S. 3580 and H.R. 8935, filed on March 14, 1940, merely incorporated by reference § 40 of the Investment Companies Act, which did include the reference to “actions at law.” After the conclusion of four weeks of Senate hearings on April 26, however, representatives of the industry met with the SEC to negotiate changes in the proposed bill. See Hearings on H.R. 10065 Before a Subcomm. of the House Comm, on Interstate and Foreign Commerce, 76th Cong., 3d Sess. 72 (1940); 86 Cong.Rec. 10069 (1940) (remarks of Senator Wagner). The result was a new draft, which finally met the approval of the industry, see House Hearings at 95; Jaretski, The Investment Company Act of 1940, 26 Wash.L.Rev. 303, 309-10 (1941), and which for the first time contained a separate jurisdictional provision referring to “suits in equity” but omitting the reference to “actions at law” which the majority seeks to restore to the statute.

. While the majority opinion does not rely on the circumstance that jurisdiction is conferred over “violations” of the statute and rules thereunder to imply a cause of action for damages at law, a district court has done so. See Bolger v. Laventhol, Krekstein, Horwath & Horwath, 381 F.Supp. 260 (S.D.N.Y.1974). I do not agree. “Violations” in the context means criminal violations, and violations on the civil side are limited to suits in equity. This is made clear by the venue provisions of § 214; (1) “any criminal proceeding” may be brought in the district court wherein any act or transaction constituting the violation occurred; (2) “any suit or action to enjoin any violation . . may be brought in . .” There is still no reference to an “action at law.”

. One might indeed argue that there is lack of subject-matter jurisdiction to enforce actions at law for damages for violations of the Advisers Act because of the lack of any specific statutory authorization, but I do not urge that. There is jurisdiction under a broad reading of the “arising under” clause of 28 U.S.C. § 1331. Cf. Illinois v. City of Milwaukee, 406 U.S. 91, 98, 92 S.Ct. 1385, 31 L.Ed.2d 712 (1972); Romero v. International Terminal Operating Co., 358 U.S. 354, 393, 79 S.Ct. 468, 3 L.Ed.2d 368 (1959) (Brennan, J., concurring and dissenting); Beil v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946). See also Tunstall v. Brotherhood of Firemen, 323 U.S. 210, 65 S.Ct. 235, 89 L.Ed. 187 (1944) (“arising under” 28 U.S.C. § 1337). The majority correctly states that plaintiffs allege jurisdiction under § 214 of the Advisers Act, the very section that does not provide for “actions at law,” but since the pleading can be amended I make no point of the insufficiency of a proper jurisdictional statement. Even if an implied claim for relief is judge-made, it may “arise under the laws of the United States.”

. The reason given by the majority is not persuasive, for its fails to note that in every single case in which an express civil liability is created in any of the Acts, the jurisdiction has already been stated in the very section creating the express liability. Thus, § 11 of the 1933 Act, 15 U.S.C. § 77k, itself provides that “any person acquiring such security . . may, either at law or in equity, in any court of competent jurisdiction, sue . . .Section 12 of the 1933 Act, 15 U.S.C. § 771, itself provides that the purchaser “may sue either at law or in equity in any court of competent jurisdiction . ..” To the same effect, see Section 9(e) of the 1934 Act, 15 U.S.C. § 78i(e); Section 16(b) of the 1934 Act, 15 U.S.C. § 78p(b); Section 18 of the 1934 Act, 15 U.S.C. § 78r; Section 16(b) of the Public Utility Holding Company Act of 1935, 15 U.S.C. § 79p(b); Section 17(b) of that Act, 15 U.S.C. § 79q(b); Section 323(a) of the Trust Indentures Act, 15 U.S.C. § 77www(a); Section 30(f) of the Investment Companies Act, 15 U.S.C. § 80a-29(f). The better explanation, it seems to me, for the general jurisdictional provision in each Act — “the District Courts of the United States . . . shall have jurisdiction” etc. — is Congress’ fear that general federal question jurisdiction under 28 U.S.C. § 1331 might not establish jurisdiction in the federal courts over securities law claims, particularly when the jurisdictional amount was lacking. The separate jurisdictional provisions associated with the several sections of the securities acts creating substantive liability referred only to “any court of competent jurisdiction,” and hence left open the question of whether the federal courts were in fact courts of “competent jurisdiction.” Thus, an independent jurisdiction was conferred on the federal courts by the general provision of each statute (and in the case of the Securities Exchange Act, exclusive jurisdiction). In short, the internal sections conferred general jurisdiction. The jurisdictional section was drawn as broadly as possible to confer clear federal jurisdiction.
The majority opinion seeks to draw support from the fact that the Senate and House Reports stated that the enforcement provisions of the Advisers Act were “generally comparable” to those of the Investment Companies Act. Ante at 875. Aside from the fact that this begs the crucial question — whether the Acts were comparable in this particular respect — it ignores what was in my view the more likely meaning of “generally comparable” as applied to the enforcement provisions: that is, that the Advisers Act is “generally comparable” to the Investment Company Act in that both provide for the concurrent jurisdiction of state and federal courts, as distinguished from the Exchange Act in which federal jurisdiction is made exclusive.

. That case was not, of course, a damage action, nor was it brought by a private party.

. The majority reasons that Section 215(b) of the Advisers Act, 15 U.S.C. § 80b-15(b) (1970), which provides that any contract violating the Act shall be void, strongly suggests that a private remedy should be implied. Ante, p. 874, supra. But it does violence to the criteria enunciated in Cort to imply an action simply because a contract is made void, or to recognize an actionable tort, simply because a statute prohibits particular conduct. Cf. Note, Section 206 Private Actions, 74 Mich.L.Rev. 308, 312 n.19 (1975). Significantly, the SEC in its amicus brief does not rely on § 215(b) of the Act.
Even if the fact that a statute renders certain contracts void were deemed ipso facto to create a private right of action, on the theory that this provision could be vindicated only by the private parties to the contract, it of course by no means follows that a damage remedy is proper. Rescission or restitution are, aside from damages, remedies ordinarily available when a contract is void. Significantly, rescission is an equitable remedy, see 5 Corbin on Contracts § 1103, so that implication of a private right of action for rescission and restitution under § 215(b) would be well within the jurisdictional grant of § 214, and consistent with the notion that it is only actions at law which are inconsistent with the statutory scheme.

. Analytically, it would be equally proper to say that implication of a private action under the Advisers Act is not “consistent with the underlying purposes of the legislative scheme.” Cort, supra, 422 U.S. at 78, 95 S.Ct. at 2088. For though such a remedy may be consistent with the goal of protecting customers of investment advisers, it is hardly consistent with the desire not to subject advisers to monetary liability, at least, until further study by Congress.

. The situation in which there is express statutory provision for one form of proceeding, as here, for equitable but not legal actions, should be distinguished from the situation in which Congress gives broad but unspecified remedial scope to the statute, see, e. g., § 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b). In the latter situation, implication of some private actions may be not merely consistent with the legislative purpose, but necessary in order fully to effectuate it.

. In Borak, the Court relied hot only on § 27’s provision for “actions at law” but also on its language “brought to enforce any liability or duty created” under the Act. The Court specifically referred to Deckert v. Independence Shares Corp., 311 U.S. 282, 61 S.Ct. 229, 85 L.Ed. 189 (1940), which had emphasized the same language in Section 22(a) of the 1933 Act, 15 U.S.C. § 77v(a), “to enforce any liability or duty created by this subchapter.” The Deckert Court added: “The power to enforce implies the power to make effective the right of recovery afforded by the Act.” 311 U.S. at 288, 61 S.Ct. at 233. (Emphasis added).

. The issue was tendered but not passed upon in Brouk v. Managed Funds, Inc., 286 F.2d 901 (8th Cir. 1961), vacated as moot, 369 U.S. 424, 82 S.Ct. 878, 8 L.Ed.2d 6 (1962). In his monumental treatise, Professor Loss does not even mention the possibility of a private damage action under § 206. He does indicate that § 215(b) is “relevant” to the question of civil liability, but concludes that there has been “no significant litigation.” See L. Loss, Securities Regulation 1757 (1961 ed.); id. at 3864-65 (Supp.1969).

. When Congress expanded the scope of the Act in 1960, it did not alter the statutory scheme. Instead, it strengthened the enforce*884ment powers of the SEC, see S.Rep. No. 1760, 86th Cong., 2d Sess. 2, 4 (1960). Pub.L. No. 86-750, §§ 2-6, 74 Stat. 885, amending §§ 203-04, 15 U.S.C. § 80b-3, -4. Moreover, the Commission was given the power to obtain injunctive relief against aiders and abettors as well as principal violators. Id. at § 12. Section 206 itself was amended to apply to unregistered as well as registered advisers. Id. at § 8. Suffice it to say that Congress was aware of the problems of enforcement and that it dealt with the problem as it saw fit. It is not for the courts to decide that this remedial scheme is still insufficient.

. Between the end of 1969 and September 30, 1970, the New York Stock Exchange composite index fell over 10%; the Dow Jones industrial average fell over 5%. Even if the hedge fund had invested in the most conservative blue-chip portfolios, therefore, plaintiffs would have suffered losses for the period.

. The majority opinion assumes that when plaintiffs discovered the “misrepresentation” they could wait until the following year to see how the market would go, because their redemption right was restricted to redemption at particular stated times. But with all respect that simply does not follow. When a person discovers that he has been defrauded, he may sue at once for rescission or damages, regardless of the contractual restriction. See Prosser on Torts § 105, at 689 (4th ed. 1971); Restatement [First] of Torts § 549 note e (1938). The contrary rule would substantially undermine congressional policy. As the court said in Royal Air Properties, Inc. v. Smith, 312 F.2d 210, 213-14 (9th Cir. 1962): “The purpose of the Securities Exchange Act is to protect the innocent investor, not one who loses his innocence and then waits to see how his investment turns out before he decides to invoke the provisions of the Act.”

. The SEC, for whose excellent work I have the highest admiration, has been rebuffed by the Supreme Court in its attempt to repeal the requirement of “in connection with the purchase or sale of a security.” See Blue Chip Stamps, supra, 421 U.S. at 732, 95 S.Ct. 1917. It has also been rebuffed by this court, see *886Levine v. Seilon, 439 F.2d 328, 329 (2d Cir. 1971). And in the Blue Chips Stamps case, Mr. Justice Powell commented that the SEC had “joined, surprisingly” in urging expansion, of the statute. 421 U.S. at 759, 95 S.Ct. 1917.

. Mr. Justice Rehnquist in Blue Chip Stamps, 421 U.S. at 740, 95 S.Ct. at 1927, stated that it was a policy concern that “even a complaint which by objective standards has very little chance of success at trial has a settlement value to the plaintiff out of any proportion to its prospect of success at trial so long as he may prevent the suit from being resolved against him by dismissal or summary judgment.” And Mr. Justice Powell considered that “allowing this type of open-ended litigation would itself be an invitation to fraud.” 421 U.S. at 761, 95 S.Ct. at 1937.
Similarly, in Securities Investor Protection Corp. v. Barbour, 421 U.S. 412, 95 S.Ct. 1733, 44 L.Ed.2d 263 (1975), Mr. Justice Marshall noted that “except with respect to the solidest of houses, the mere filing of an action predicated upon allegations of financial insecurity might often prove fatal.” 421 U.S. at 422, 95 S.Ct. at 1739. He added: “These consequences are too grave, and when unnecessary, too inimical to the purposes of the Act, for the Court to impute to Congress an intent to grant to every member of the investing public control over their occurrence.” Id. at 423, 95 S.Ct. at 1740.

. How strikingly similar was the explanation by the SEC representative to the House of the provisions of § 210:
“The only other provision of consequence is section 210, which in our opinion will have a very salutary effect. The investment counsels were a little concerned about the effect on their business if it got around that the Securities and Exchange Commission was conducting an investigation. In order to safeguard against this danger section 210(a) and (b) provide that there shall not be any disclosure of any investigation by the Securities and Exchange Commission until it has made up its mind that a public hearing is to be held. Then in order to safeguard them further, subsection (c), provides that the Commission can not ask these investment counsellors to disclose their clients, and what their investments are, except if there is some indication of wrongdoing. Thereafter, in connection with the investigation, they have to make the disclosure.”
Hearings on H.R. 10065 before the Subcomm. of the House Comm, on Interstate and Foreign Commerce, 76th Cong., 3d Sess. 138 (1940); see also Senate Hearings, supra, at 713, 715.

. The Commission in its amicus brief asserts that “this private action undeniably could be maintained [on the basis of § 10(b)] alone.” This is contrary to our unanimous holding on this appeal. But we all agree that in proper circumstances, investment advisers are as liable as any other persons under § 10(b). Cf. Superintendent of Insurance v. Bankers Life & Cas. Co., 404 U.S. 6, 92 S.Ct. 165, 30 L.Ed.2d 128 (1971); Herzfeld v. Laventhol, Krekstein, Horwath & Horwath, CCH Fed.Sec.L.Rptr. ¶ 95,660 (2d Cir., July 15, 1976); Shapiro v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 495 F.2d 228 (2d Cir. 1974). This fortifies the argument that there is no need for an additional judicially created remedy against advisers where the purchase or sale of securities is involved.