Arthur Goldberg

“ Experience has shown that disclosure in such situations, while not onerous to the adviser, is needed to preserve the climate of fair dealing which is so essential to maintain public confidence in the securities industry and to preserve the economic health of the country. ”

“ It would defeat the manifest purpose of the Investment Advisers Act of 1940 for us to hold, therefore, that Congress, in empowering the courts to enjoin any practice which operates 'as a fraud or deceit,' intended to require proof of intent to injure and actual injury to clients. ”

“ An adviser who, like respondents, secretly trades on the market effect of his own recommendation may be motivated-consciously or unconsciously-to recommend a given security not because of its potential for long-run price increase (which would profit the client) , but because of its potential for short-run price increase in response to anticipated activity from the recommendation (which would profit the adviser) . ”

“ We are called upon in this case to decide whether under the Investment Advisers Act of 1940 [1] the Securities and Exchange Commission may obtain an injunction compelling a registered investment adviser to disclose to his clients a practice of purchasing shares of a security for his own account shortly before recommending that security for long-term investment and then immediately selling the shares at a profit upon the rise in the market price following the recommendation. ”

“ It is arguable-indeed it was argued by 'some investment counsel representatives' who testified before the Commission-that any 'trading by investment counselors for their own account in securities in which their clients were interested * * *' [48] creates a potential conflict of interest which must be eliminated. We need not go that far in this case, since here the Commission seeks only disclosure of a conflict of interests with significantly greater potential for abuse than in the situation described above. ”

“ An investor seeking the advice of a registered investment adviser must, if the legislative purpose is to be served, be permitted to evaluate such overlapping motivations, through appropriate disclosure, in deciding whether an adviser is serving 'two masters' or only one, 'especially * * * if one of the masters happens to be economic self-interest.' United States v. ”

“ Neither the Commission nor the courts should be required 'to separate the mental urges,' Peterson v. Greenville, 373 U.S. 244, 248, 83 S.Ct. 1119, 1121, 10 L.Ed.2d 323, of an investment adviser, for ' (t) he motives of man are too complex * * * to separate * * *.' Mosser v. Darrow, 341 U.S. 267, 271, 71 S.Ct. 680, 682, 95 L.Ed. 927. The statute, in recognition of the adviser's fiduciary relationship to his clients, requires that his advice be disinterested. To insure this it empowers the courts to require disclosure of material facts. ”

“ Id., 306 F.2d at 614. We granted certiorari to consider the question of statutory construction because of its importance to the investing public and the financial community. 371 U.S. 967, 83 S.Ct. 550, 9 L.Ed.2d 538. ”