to prevent investor misunderstanding is the very essence of federal securities regulation."89
Second, the approach is overly broad. Because the Congress regulates taxes, shipping, and numerous other economic areas, the court's theory would authorize curtailment of incredibly diverse realms of speech.
The court may have been hinting, however, at the theory advanced in the Posadas case.90 There, Chief Justice Rehnquist authored an opinion that permitted a ban on casino advertising, since the government could have forbade the gambling. The speech restriction was, arguably, the lesser restriction. Therefore, because the Congress could ban trading in defined risky securities, or ban the corporate sale of securities in defined risky underwritings, perhaps the Congress can ban or regulate speech about the transactions, rather than ban the activity itself. Many state regulatory schemes, popularly called merit regulation, do indeed ban specified underwritings within their borders.
Justice Brennan's objections to this argument were described in the previous chapter. Further, this argument is also subject to an overreach objection. Because vast areas of economic activity can be banned, or severely regulated, the Rehnquist approach would validate a potentially enormous restraint of speech.
This chapter considered leading cases on the SEC and the First Amendment. The cases underscore the difficulty in fitting much SEC speech into the class of commercial speech. The cases also suggest creating a third category of speech, SEC speech, to supplement the categories of fully protected speech and commercial speech. We will have to examine modern legal scholarship on the purposes of the First Amendment to find the appropriate intellectual structure in which to place these attempts at definition. One theoretical approach is to use certain powerful economic models and arguments to correctly define the categories. These are considered in chapter 4. In chapter 3 other theoretical work, not necessarily based on economic approaches, that have addressed these issues is scrutinized. Finally, in chapter 5 some ideas that will help in considering these perplexing issues are suggested.