Chapter 7

Usman Riaz

Lowe vs SEC
Q1. Yes. The first amendment protects all publications under the advisory act. Lowe is not allowed to
give advice or personally take a client but it can do the publications under the first amendment.
Q2. The SEC can seek an injunction in the case that Lowes publication position or advertise itself as
brokers and try to attract clients.
Q3. Zweig vs Hearst Corp is a similar case but the decision was taken keeping the first amendment in
view.
Goldstein v SEC
Q1. Hedge funds are managed much more aggressively than their mutual fund counterparts. They are
able to take speculative positions in derivative securities such as options and have the ability to short
sell stocks. Mutual funds, on the other hand, are not permitted to take these highly leveraged positions
and are typically safer as a result. Another key difference between these two types of funds is their
availability. Hedge funds are only available to a specific group of sophisticated investors with high net
worth. The congress did intend to regulate the hedge funds under the Dodd Frank Act.
Q2. When an administrative agency formulates its rules, it has all the liberty to elaborate on the text of
the statute so that the rules are defined properly and the underlying principle is disclosed properly.
SEC v Capital Gains Bureau
Q1. The district court mean that the fraud was not committed directly to harm the investors. There was
no direct action as to harm the investors and Capital Bureau just did the transactions and did not force
the investors to buy the stock. It was only an advice and there was no role of Capital Gains Bureau In
performing the transactions on behalf of the investors.
Q2. In the fiduciary relationship, the person has to act in all ways that are beneficial for the client. It has
to disclose all its transactions to the client whereas this is not an obligation an ordinary care standard
relationship.
Deutsche Asset Management Inc.
Q1. They could have implemented Chinese wall where the information could not have been transferred
from the DeAM to the advisory operations. This would have helped in mitigating the conflict of interest.
Q2. Deutsche itself agreed to pay the fine and so the case was not forwarded.
Transamerica Mortgages Inc
Q1. I agree to this statement.
Q2. The congress did not amend this because it did not want to deprive the persons of private cause.