Chalk One Up for Freedom of the Press

Warren Burger's Supreme Court tends to treat civil liberties like a Miami summer afternoon treats popsicles. So it was a most welcome surprise when the Court recently handed down a decision that actually enlarges freedom of the press.

The case was Lowe v. SEC. The issue was whether the Securities and Exchange Commission, which has registered and regulated investment advisers for 45 years now, may license financial newsletters and, under that authority, forbid a newsletter's publication because of the publisher's personal background. Lower courts have nixed the SEC's ambitions in this area before, but the agency wouldn't take no for an answer. This time, the object of the SEC's free-speech restraint took the issue all the way to the Supreme Court and won.

No doubt the SEC figured it had a good case for shutting down a financial newsletter put out by Christopher Lowe of Jersey City, New Jersey. Lowe had previously pled guilty to misappropriating an investment client's funds, tampering with evidence, and stealing from a bank, for which he duly spent time.

When the SEC told him that it would therefore revoke his registration as an investment advisor, he left the business. But when they told him that he couldn't put out his financial newsletter, either, he stood his ground and continued publishing.

The SEC is not accustomed to such insubordination (few federal agencies are). It ordered its lawyers to court to bring the Lowe Investment & Financial Letter to an end.

Keep in mind that the SEC never charged that Lowe had published anything illegal. As Justice John Paul Stevens, who wrote the Supreme Court opinion, noted, "there was no evidence that Lowe's criminal convictions were related to the publications; no evidence that Lowe had engaged in any trading activity in any securities that were the subject of advice or comment in the publications; and no contention that any of the information published…had been false or materially misleading." In fact, the worst complaint that the SEC could dredge up from Lowe's readers was that they weren't receiving the newsletter regularly enough.

The Supreme Court, to its credit, would have none of it. It got Lowe off the hook, but it went further than that. In an 8-to-0 decision, the justices declared that financial newsletters dispensing investment information and advice are exempt from the SEC's obnoxious registration requirements vis-à-vis investment advisors.

Five of the justices declined to consider the case on First Amendment grounds. Rather, they decided as they did because when Congress passed the Investment Advisers Act (the legislation mandating the SEC to regulate investment advisers) in 1940, the law excluded "the publisher of any bona fide newspaper, news magazine or business or financial publication of general and regular circulation."

For defenders of freedom of speech and freedom of the press, this statutory argument against the SEC's overweening power is a limited victory. Yet it is significant that three of the justices, while voting with the majority, signed a minority opinion arguing that the SEC's attempt to forbid Lowe's publishing activities was an unconstitutional restraint on First Amendment freedoms.

Indeed, the Lowe case suggests larger questions. What rationale can there really be for a government agency to stop the Christopher Lowes of this world from publishing their newsletters? Evidently, the SEC believes that the government has a duty to prevent ex-convicts from infecting the general population via the printed word. If so, then the bonfire consuming Christopher Lowe's newsletters could be stoked with the widely distributed works of other convicted criminals—such as O. Henry, Jean Genet, Oscar Wilde, and John Ehrlichman.

But perhaps the SEC in its heart of hearts has been less ambitious: it may want only to protect gullible minds from bad financial advice. By this reckoning, the SEC in its wisdom would have to tally the recommendations of hundreds of financial newsletters, rank the quality of their recommendations, and then every year ban inadvisable ones—the lowest third? the lowest half?—from publishing. Consumer protection, SEC-style, would logically require no less.

REASON, we're proud to note, was the first general-circulation magazine to draw widespread attention to the SEC scheme of regulating financial newsletters, with an investigation published in January 1983 ("Subverting the First Amendment," by Michael McMenamin and William Gorenc). "There is an agency of the government," warned the article, "that has arrogated to itself the power to ride roughshod over the First Amendment—first with the requirement that permission be obtained and requirements be met before access to a printing press be allowed; then, once its foot is in the door, with demands pursued via lawsuits and censorship of editorial content."

That abuse of power is now ended, thanks to the Supreme Court. And those of us who may never even glance at a financial newsletter can yet breathe a bit more freely.