Securities & Exchange Commission v. Capital Gains Research Bureau, Inc.

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. The answer to this question turns on whether the practice — known in the trade as “scalping” — “operates as a fraud or…