Mr. Justice HARLAN, dissenting.
I would affirm the judgment below substantially for the reasons given by Judge Moore in his opinion for the majority of the Court of Appeals sitting en banc, 2 Cir., 306 F.2d 606, and in his earlier opinion for the panel. 2 Cir., 300 F.2d 745. A few additional observations are in order.
Contrary to the majority, I do not read the Court of Appeals' en banc opinion as holding that either § 206(1) of the Investment Advisers Act of 1940, 54 Stat. 847 (prohibiting the employment of 'any device, scheme, or artifice to defraud any client or prospective client'), or § 206(2), 54 Stat. 847 (prohibiting the engaging 'in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client'), is confined by traditional common law concepts of fraud and deceit. That court recognized that 'federal securities laws are to be construed broadly to effectuate their remedial purpose.' 306 F.2d, at 608. It did not hold or intimate that proof of 'intent to injure and actual injury to clients' (ante, p. 186) was necessary to make out a case under these sections of the statute. Rather it explicitly observed: 'Nor can there be any serious dispute that a relationship of trust and confidence should exist between the advisor and the advised,' ibid., thus recognizing that no such proof was required. In effect the Court of Appeals simply held that the terms of the statute require, at least, some proof that an investment adviser's recommendations are not disinterested.
I think it clear that what was shown here would not make out a case of fraud or breach of fiduciary relationship under the most expansive concepts of common law or equitable principles. The nondisclosed facts indicate no more than that the respondents personally profited from the foreseeable reaction to sound and impartial investment advice.
The cases cited by the Court (ante, p. 198) are wide of the mark as even a skeletonized statement of them will show. In Securities & Exchange Comm'n v. Torr, 15 F.Supp. 315, reversed on other grounds, 87 F.2d 446, defendants were in effect bribed to recommend a certain stock. Although it was not apparent that they lied in making their recommendations, it was plain that they were motivated to make them by the promise of reward. In the case before us, there is no vestige of proof that the reason for the recommendations was anything other than a belief in the soundness of the investment advice given.
Charles Hughes & Co. v. Securities & Exchange Comm'n, 139 F.2d 434, involved sales of stock by customers' men to those ignorant of the market value of the stocks at 16% to 41% above the over-the-counter price. Defendant's employees must have known that the customers would have refused to buy had they been aware of the actual market price.
The defendant in Norris & Hirshberg, Inc., v. Securities & Exchange Comm'n, 85 U.S.App.D.C. 268, 177 F.2d 228, dealt in unlisted securities. Most of its customers believed that the firm was acting only on their behalf and that its income was derived from commissions; in fact the firm bought from and sold to its customers, and received its income from mark-ups and mark-downs. The nondisclosure of this basic relationship did not, the court stated, 'necessarily establish that petitioner violated the antifraud provisions of the Securities and Securities Exchange Acts.' Id., at 271, 177 F.2d at 231. Defendant's trading practices, however, were found to establish such a violation; an example of these was the buying of shares of stock from one customer and the selling to another at a substantially higher price on the same day. The opinion explicitly distinguishes between what is necessary to prove common law fraud and the grounds under securities legislation sufficient for revo ation of a broker-dealer registration. Id., at 273, 177 F.2d, at 233.
Arleen Hughes v. Securities & Exchange Comm'n, 85 U.S.App.D.C. 56, 174 F.2d 969, concerned the revocation of the license of a broker-dealer who also gave investment advice but failed to disclose to customers both the best price at which the securities could be bought in the open market and the price which she had paid for them. Since the court expressly relied on language in statutes and regulations making unlawful 'any omission to state a material fact,' id., at 63, 174 F.2d, at 976, this case hardly stands for the proposition that the result would have been the same had such provisions been absent.