capital gains bureau argued october decided december investment advisers act securities exchange commission may obtain injunction compelling registered investment adviser disclose clients practice purchasing shares security account shortly recommending security investment immediately selling shares profit upon rise market price following recommendation since practice operates fraud deceit upon client prospective client within meaning act pp congress empowering courts enjoin practice operates fraud deceit upon client intend require proof intent injure actual injury client intended act construed like securities legislation enacted purpose avoiding frauds technically restrictively rather flexibly effectuate remedial purposes pp act empowers courts upon showing made require adviser make full frank disclosure practice trading effect recommendations pp light evident purpose act substitute philosophy disclosure philosophy caveat emptor assumed omission act specific proscription nondisclosure intended limit application antifraud antideceit provisions act render commission impotent enjoin suppression material facts pp amendment act justify narrow interpretation original enactment pp even respondents advice honest sense believed sound offer purpose furthering personal pecuniary objectives commission entitled injunction requiring disclosure pp david ferber argued cause petitioner brief solicitor general cox daniel friedman philip loomis leo fennelly argued cause filed brief respondents justice goldberg delivered opinion called upon case decide whether investment advisers act securities exchange commission may obtain injunction compelling registered investment adviser disclose clients practice purchasing shares security account shortly recommending security investment immediately selling shares profit upon rise market price following recommendation answer question turns whether practice known trade scalping operates fraud deceit upon client prospective client within meaning act hold commission may enforce compliance act obtaining injunction requiring adviser make full disclosure practice clients commission brought action respondents district southern district new york hearing application preliminary injunction following facts established respondents publish two investment advisory services one capital gains report subject proceeding report mailed monthly approximately subscribers pay annual subscription price carries following description investment service devoted exclusively protection investment capital realization steady attractive income therefrom accumulation capital gains thru timely purchase corporate equities proved undervalued basis facts commission requested preliminary injunction necessary effectuate purposes investment advisers act injunction required respondents future report disclose material facts concerning inter alia purchase recommended securities within short period prior distribution recommendation intent sell sale said securities within short period distribution said recommendation district denied request preliminary injunction holding words fraud deceit used investment advisers act technical sense commission failed show intent injure clients actual loss money clients supp appeals second circuit sitting en banc vote accepted district limited construction fraud deceit affirmed denial injunctive relief majority concluded violation act found absent proof misstatements false figures contained bulletins investment advice unsound defendants bribed paid tout stock contrary beliefs bulletins scheme get rid worthless stock recommendations made purpose endeavoring artificially raise market respondents might unload holdings profit four dissenting judges pointed doctrines fraud deceit grew business climate different involved sale securities urged broad remedial construction statute encompass respondents conduct granted certiorari consider question statutory construction importance investing public financial community decision case turns whether congress empowering courts enjoin practice operates fraud deceit upon client prospective client intended require commission establish fraud deceit technical sense including intent injure actual injury clients whether congress intended broad remedial construction act encompass nondisclosure material facts resolution issue consider history purpose investment advisers act investment advisers act last series acts designed eliminate certain abuses securities industry abuses found contributed stock market crash depression preceded securities act securities exchange act public utility holding company act trust indenture act investment company act fundamental purpose common statutes substitute philosophy full disclosure philosophy caveat emptor thus achieve high standard business ethics securities industry recently said related context requires little appreciation happened country realize essential highest ethical standards prevail every facet securities industry silver new york stock exchange public utility holding company act authorized directed securities exchange commission make study functions activities investment trusts investment companies pursuant mandate commission made exhaustive study report included consideration investment counsel investment advisory services aspect study report culminated investment advisers act report reflects attitude shared investment advisers commission investment advisers completely perform basic function furnishing clients personal basis competent unbiased continuous advice regarding sound management investments unless conflicts interest investment counsel client removed report stressed affiliations investment advisers investment bankers corporations might impediment disinterested objective critical attitude toward investment clients concern limited deliberate conscious impediments objectivity advisers commission well aware whenever advice client might result financial benefit adviser fee advice advice client might way tinged pecuniary interest whether consciously subconsciously motivated report quoted one leading investment adviser said put emphasis subconscious motivation situations quoted member commission staff suggested significant part problem existence deliberate intent obtain financial advantage rather existence subconsciously prejudice favor one financial interests report incorporated code ethics standards practice one leading investment counsel associations contained following canon investment adviser continuously occupy impartial disinterested position free humanly possible subtle influence prejudice conscious unconscious scrupulously avoid affiliation act subjects position challenge respect emphasis added one activity specifically mentioned condemned investment advisers testified commission trading investment counselors account securities clients interested study report authorized directed statute culminated preparation introduction senator wagner bill changes became investment advisers act declaration policy original bill stated upon basis facts disclosed record report securities exchange commission hereby declared national public interest interest investors adversely affected business investment advisers conducted defraud mislead investors enable advisers relieve fiduciary obligations clients hereby declared policy purposes title accordance provisions title shall interpreted mitigate far presently practicable eliminate abuses enumerated section two fundamental principles upon pioneers new profession undertook meet growing need unbiased investment information guidance first limit efforts activities study investment problems investor standpoint engaging activity security selling brokerage might directly indirectly bias investment judgment second remuneration work consist solely definite professional fees fully disclosed advance conclusion moreover derogation common law fraud district majority appeals suggested contrary finds support process courts adapted common law fraud commercial transactions society true common law intent injury deemed essential elements damage suit parties transaction action suit preliminary injunction relief sought dissenting judges characterized mild prophylactic requiring fiduciary disclose clients security holdings dealings recommended securities issuance recommendations content fraud remained static courts seem assumed varied example nature relief sought relationship parties merchandise issue necessary suit equitable prophylactic relief establish elements required suit monetary damages law come regard fraud primarily tort hedged stringent requirements chief strong moral rather immoral element equity regarded along regarded conveniently comprehensive word expression lapse high standard conscientiousness exacted party occupying certain contractual fiduciary relation towards another party fraud broader meaning equity law intention defraud misrepresent necessary element fraud indeed sense equity properly includes acts omissions concealments involve breach legal equitable duty trust confidence justly reposed injurious another undue unconscientious advantage taken another assume congress enacting legislation prevent fraudulent practices investment advisers unaware developments common law fraud thus even agree courts congress intended effect codify common law fraud investment advisers act logical conclude congress codified common law remedially courts adapted prevention fraudulent securities transactions fiduciaries technically traditionally applied damage suits parties transactions involving land ordinary chattels foregoing analysis judicial treatment fraud reinforces conclusion congress empowering courts enjoin practice operates fraud deceit upon client intend require proof intent injure actual injury client congress intended investment advisers act construed like securities legislation enacted purpose avoiding frauds technically restrictively flexibly effectuate remedial purposes ii turn consideration whether specific conduct issue type congress intended reach investment advisers act arguable indeed argued investment counsel representatives testified commission trading investment counselors account securities clients interested creates potential conflict interest must eliminated need go far case since commission seeks disclosure conflict interests significantly greater potential abuse situation described adviser like respondents secretly trades market effect recommendation may motivated consciously unconsciously recommend given security potential price increase profit client potential price increase response anticipated activity recommendation profit adviser investor seeking advice registered investment adviser must legislative purpose served permitted evaluate overlapping motivations appropriate disclosure deciding whether adviser serving two masters one especially one masters happens economic mississippi valley accordingly hold investment advisers act empowers courts upon showing made require adviser make full frank disclosure practice trading effect recommendations iii respondents offer three basic arguments conclusion argue first congress made make failure disclose material facts unlawful investment advisers act securities act absent specific language assumed congress intended include failure disclose general proscription practice operates fraud deceit considering history chronology statutes omission seem significant securities act first experiment federal regulation securities industry understandable therefore congress declaring certain practices unlawful include general proscription fraudulent deceptive practices abundance caution specific proscription nondisclosure soon became clear however courts aware previously outlined developments common law fraud merging proscription nondisclosure general proscription fraud treating former effect one variety latter example securities exchange torr supp rev grounds judge patterson held suppression information material evaluation disinterestedness investment advice operated deceit purchasers later cases also treated nondisclosure one variety fraud deceit light light evident purpose investment advisers act substitute philosophy disclosure philosophy caveat emptor assume omission act specific proscription nondisclosure intended limit application antifraud antideceit provisions act render commission impotent enjoin suppression material facts reasonable assumption considering transpired congress enacting investment advisers act proscribing practice operates fraud deceit deemed specific proscription nondisclosure surplusage respondents also argue amendment investment advisers act justifies narrow interpretation original enactment amendment made two significant changes relevant manipulative practices added list specifically proscribed nothing suggest however respect requirement disclosure manipulative broader fraudulent deceptive indication adding new proscription congress intended narrow scope original proscription new amendment also authorizes commission rules regulations define prescribe means reasonably designed prevent acts practices courses business fraudulent deceptive manipulative legislative history offers indication however congress intended rules substitute general flexible antifraud provisions long considered necessary control versatile inventions moreover intent congress must culled events surrounding passage legislation pinions attributed congress twenty years event considered evidence intent congress securities exchange capital gains research bureau dissenting opinion see philadelphia nat bank respondents argue finally advice honest sense believed sound offer purpose furthering personal pecuniary objectives course another way putting rejected argument elements technical fraud particularly intent must established injunction requiring disclosure may ordered practice however potential abuse operates fraud deceit within meaning act relevant information suppressed investment advisers act directed dishonor also conduct tempts dishonor mississippi valley failure disclose material facts must deemed fraud deceit within intended meaning experience amply reveals darkness ignorance commercial secrecy conditions upon predatory practices best thrive impose upon securities exchange commission burden showing deliberate dishonesty condition precedent protecting investors prophylaxis disclosure effectively nullify protective purposes statute reading act light background find requirement commanded neither commission courts required separate mental urges peterson greenville investment adviser motives man complex separate mosser darrow statute recognition adviser fiduciary relationship clients requires advice disinterested insure empowers courts require disclosure material facts misconceives purpose statute confine application dishonest opposed honest motives dean shulman said discussing nature securities transactions required picture simply show window entire store simply truth statements volunteered disclosure high standards business morality exacted laws regulating securities industry permit investment adviser trade market effect recommendations without fully fairly revealing personal interests recommendations clients experience shown disclosure situations onerous adviser needed preserve climate fair dealing essential maintain public confidence securities industry preserve economic health country judgment appeals reversed case remanded district proceedings consistent opinion reversed remanded footnotes stat amended supp iv provides relevant part shall unlawful investment adviser use mails means instrumentality interstate commerce directly indirectly employ device scheme artifice defraud client prospective client engage transaction practice course business operates fraud deceit upon client prospective client acting principal account knowingly sell security purchase security client acting broker person client knowingly effect sale purchase security account client without disclosing client writing completion transaction capacity acting obtaining consent client transaction prohibitions paragraph shall apply transaction customer broker dealer broker dealer acting investment adviser relation transaction stat amended supp iv provides relevant part whenever shall appear commission person engaged engaged engage act practice constituting violation provision subchapter rule regulation order hereunder person aided abetted counselled commanded induced procured aiding abetting counselling commanding inducing procuring aid abet counsel command induce procure violation may discretion bring action proper district proper territory place subject jurisdiction enjoin acts practices enforce compliance subchapter rule regulation order hereunder upon showing person engaged engaged engage act practice aiding abetting counseling commanding inducing procuring act practice permanent temporary injunction decree restraining order shall granted without bond see appendix infra requested injunction reads full follows wherefore plaintiff demands temporary restraining order preliminary injunction final injunction enjoining defendants capital gains research bureau harry schwarzmann agents servants employees attorneys assigns said capital gains research bureau investment adviser directly indirectly use mails means instrumentalities interstate commerce employing device scheme artifice defraud client prospective client failing disclose material facts concerning purchase defendant capital gains research bureau securities within short period prior distribution recommendation said defendant clients prospective clients purchase said securities intent sell sale said securities said defendant recommended purchased within short period distribution said recommendation clients prospective clients effecting short sales said defendant within short period prior distribution recommendation said defendant clients prospective clients dispose said securities intent said defendant purchase purchase said securities cover short sales purchase said defendant account puts calls securities within short period prior distribution recommendation clients prospective clients purchase disposition said securities engaging transaction practice course business operates fraud deceit upon client prospective client failing disclose material facts concerning matters set forth demand hereof case originally heard panel appeals one judge dissenting affirmed district rehearing en banc ordered appeals purported recognize federal securities laws construed broadly effectuate remedial purpose affirming district technical construction investment advisers act requiring proof misstatements unsound advice bribery intent unload worthless stock read statute effect confined traditional concepts fraud deceit see generally douglas bates federal securities act yale loomis securities exchange act investment advisers act geo rev shulman civil liability securities act yale cf galbraith great crash stat amended et seq stat amended et seq stat amended et seq stat amended et seq stat amended et seq see sess quoted wilko swan stat study concentrated investment advisory services provide personalized counseling investors see investment trusts investment companies report securities exchange commission pursuant section public utility holding company act investment counsel investment management investment supervisory investment advisory services doc hereinafter cited sec report senate committee banking currency receive communications publishers investment advisory services see hearings subcommittee senate committee banking currency pt exhibits act specifically covers person compensation engages business advising others either directly publication writings stat sec report ibid ibid emphasis added see text accompanying note supra sess hearings subcommittee senate committee banking currency sess hereinafter cited senate hearings hearings subcommittee house committee interstate foreign commerce sess hereinafter cited house hearings senate hearings bill enacted contain section attributing specific abuses investment adviser profession section eliminated apparently urging investment advisers denying abuses occurred attributed certain fringe elements profession feared public general indictment investment advisers congress irreparable harm fledgling profession see senate hearings inferred therefore section eliminated congress concluded abuses occurred congress desire prevent repetition future logical inference considering legislative background act section omitted avoid condemning entire profession depends success continued public confidence acts sess hereinafter cited house report see also sess hereinafter cited senate report see senate report loss securities regulation ed see cases cited fraud even damage suit parties transaction intent must established need intent cause injury client courts seem assumed noted necessary person making misrepresentations intend cause loss gain profit necessary intend action reliance truth misrepresentations harper james law torts fact defendant disinterested best motives thought plaintiff kindness absolve liability long fact intend mislead prosser law torts see restatement torts comment illustration clear respondents failure disclose practice issue purposeful intended action taken reliance claimed disinterestedness service exclusive concern clients interests neither criminal proceeding willfully violating act stat amended proceeding revoke suspend registration public interest stat amended considerations may relevant proceedings compare federal communications american broadcasting hanbury modern equity ed see letter lord hardwicke lord kames dated june printed parkes history chancery quoted snell principles equity ed fraud infinite equity lay rules far go farther extending relief define strictly species evidence jurisdiction cramped perpetually eluded new schemes fertility man invention contrive de funiak handbook modern equity ed moore crawford quoting story equity jur prosser law torts citing cases see generally keeton fraud concealment texas rev harper james law torts see generally shulman civil liability securities act yale sutherland statutory construction ed et seq citing cases see note comment chi rev see text accompanying note supra discussion effects investment advisory service recommendations market price securities see note rev discussing conflicts interest said reason rule inhibiting party occupies confidential fiduciary relations toward another assuming antagonistic positions principal matters involving subject matter trust sometimes said rest sound public policy also justified recognition authoritative declaration man serve two masters considering human nature must dealt rule stop actual violations trust relations includes within purpose removal temptation violate hazelton sheckells said objection rests tendency done particular case inquire done improper probably hidden appear mississippi valley stat amended provides shall unlawful person offer sale securities use means instruments transportation communication interstate commerce use mails directly indirectly employ device scheme artifice defraud obtain money property means untrue statement material fact omission state material fact necessary order make statements made light circumstances made misleading engage transaction practice course business operates operate fraud deceit upon purchaser see archer securities exchange cir cert denied charles hughes securities exchange cir cert denied hughes securities exchange app norris hirshberg securities exchange app speed transamerica stat supp iv amendment relevant made unlawful investment adviser engage act practice course business fraudulent deceptive manipulative commission shall purposes paragraph rules regulations define prescribe means reasonably designed prevent acts practices courses business fraudulent deceptive manipulative see stat amended refers devices manipulative deceptive otherwise fraudulent emphasis added stonemets head mo see also note supra shulman civil liability securities act yale justice harlan dissenting affirm judgment substantially reasons given judge moore opinion majority appeals sitting en banc earlier opinion panel additional observations order contrary majority read appeals en banc opinion holding either investment advisers act stat prohibiting employment device scheme artifice defraud client prospective client stat prohibiting engaging transaction practice course business operates fraud deceit upon client prospective client confined traditional common law concepts fraud deceit recognized federal securities laws construed broadly effectuate remedial purpose hold intimate proof intent injure actual injury clients ante necessary make case sections statute rather explicitly observed serious dispute relationship trust confidence exist advisor advised thus recognizing proof required effect appeals simply held terms statute require least proof investment adviser recommendations disinterested think clear shown make case fraud breach fiduciary relationship expansive concepts common law equitable principles nondisclosed facts indicate respondents personally profited foreseeable reaction sound impartial investment advice cases cited ante wide mark even skeletonized statement show securities exchange torr supp reversed grounds defendants effect bribed recommend certain stock although apparent lied making recommendations plain motivated make promise reward case us vestige proof reason recommendations anything belief soundness investment advice given charles hughes securities exchange involved sales stock customers men ignorant market value stocks price defendant employees must known customers refused buy aware actual market price defendant norris hirshberg securities exchange app dealt unlisted securities customers believed firm acting behalf income derived commissions fact firm bought sold customers received income nondisclosure basic relationship stated necessarily establish petitioner violated antifraud provisions securities securities exchange acts defendant trading practices however found establish violation example buying shares stock one customer selling another substantially higher price day opinion explicitly distinguishes necessary prove common law fraud grounds securities legislation sufficient revocation registration arleen hughes securities exchange app concerned revocation license also gave investment advice failed disclose customers best price securities bought open market price paid since expressly relied language statutes regulations making unlawful omission state material fact case hardly stands proposition result provisions absent speed transamerica controlling stockholder corporation made public offer buy stock concealing shareholders information known insider indicated real value stock considerably greater price set public offer shareholders aware concealment undoubtedly refused sell consequence selling suffered ascertainable damages archer securities exchange defendant copartners company dealing unlisted securities concealed name claude westfall found control business westfall thereby enabled defraud customers brokerage firm harris upham worked trader securities customers latter firm bought defendants company market level defendants company sold securities clients harris upham prices market cases arleen hughes turned explicit provisions nondisclosure concealment involved clearly reflected dishonest dealing vital consummation relevant transactions factors revealed record present case apparent able achieve result reached today construing provisions investment advisers act might pure conflict interest statute cf mississippi valley something particular legislation purport find nothing terms statute legislative history lends support absolute rule disclosure established apart factors dealt two opinions appeals seems especially significant congress enacting investment advisers act include express disclosure provision found securities act stat even though carry advisers act comparable fraud deceit provisions securities act attribute presence disclosure provision earlier statute abundance caution ante omission later statute congressional belief inclusion surplusage ante singularly unconvincing explanation controlling difference two statutes however salutary may thought disclosure rule fashioned find authority either statute regulation duly promulgated thereunder two terms ago refused extend certain provisions securities exchange act encompass policy considerations least cogent urged blau lehman exercised wise judicial restraint case particularly interlocutory stage litigation conceivable trial able make case statute construed according terms respectfully dissent according respondents brief fact appear contested annual gross income capital gains research bureau publishing investment information advice even accepting figures respondents profit trading transactions question somewhat less thus basis inference respondents advice tainted might drawn respondents buying selling activities significant lacking record section makes unlawful obtain money property means omission state material fact necessary order make statements made light circumstances made misleading section act makes unlawful employ device scheme artifice defraud engage transaction practice course business operates operate fraud deceit upon purchaser compare language provisions investment advisers act supra argument time enactment investment advisers act congress become aware courts merging proscription nondisclosure contained securities act general proscription fraud also found act ante however federal case cited securities exchange torr ante supra failure fiduciary disclose advice prompted bribe equated trial judge deceit decision hardly deemed establish nondisclosure fact material recipient investment advice fraud deceit saying least strains credulity provision expressly proscribing material omissions thought congress surplusage came enacting act particularly remembered violation fraud deceit section punishable criminally investment advisers act stat congress must known courts favor expansive constructions criminal statutes