In chapter 1 we described the commercial speech doctrine as developed by the Supreme Court. Now let us examine the judicial application of the First Amendment to regulation by the Securities and Exchange Commission (SEC). We will ascertain whether the commercial speech doctrine fits SEC speech, and if it does not, what alternative analysis may be developed by the courts.
The SEC regulates corporate and individual disclosure in connection with the purchase and sale of securities, and in regard to the governance of the publicly held corporation.1 Under the Securities Act of 1933 the commission has established a structure of mandatory disclosure for the offer and sale of securities by corporations and controlling shareholders.2 Pursuant to that regulatory system, corporations prepare elaborate disclosure documents called prospectuses and registration statements.3 The Securities Exchange Act of 1934 requires the commission to establish a system of mandatory disclosure for proxy statements in connection with meetings of shareholders.4 Requirements are established for routine meetings as well as extraordinary meetings that involve proxy contests and major mergers and reorganizations. The commission also has established a complex system of mandatory financial and accounting disclosure for various classes of publicly held coporations.5 Pursuant to this structure, corporations prepare annual reports on Form 10K and periodic reports on Forms 8K and 10Q. The purpose of mandatory disclosure is to winnow out the false from the true. A related purpose is to produce a complete and informative description of the business. It is a modern form of censorship designed by a concerned