Free Speech for the 99% on Trial in Bulldog Investors v. Massachusetts

Washington, DC, March 5, 2012 – The Competitive Enterprise Institute today filed an amicus brief in support of hedge fund Bulldog Investors and free speech rights.  Bulldog is suing the state of Massachusetts for violating the company’s First Amendment free speech rights after the state filed an administrative complaint against the company for responding to a citizen’s request for information.  Following an adverse ruling by the state supreme court, the case is now on appeal to the U.S. Supreme Court.

“Under the regulation at issue here, journalists, academics, students and others who are not wealthy or financially sophisticated cannot gain access to truthful, non-misleading information published by hedge funds on websites and in emails for one reason alone: because they are not eligible to buy securities issued by hedge funds,” the amicus brief argues. “Only people who are able to satisfy government-prescribed criteria of wealth and financial sophistication may do so.”

CEI financial policy expert John Berlau offered further comment on the importance of this case.

This case is about the fundamental First Amendment right of the 99 percent of Americans not wealthy enough to invest in a hedge fund to be able to receive basic information about how hedge funds work. Due to the nanny state actions of Massachusetts and the vagueness of the rules of the Securities and Exchange Commission, hedge funds and venture capitalists have less freedom to communicate over the Internet than other sites do. These rules, which broadly define routine communications with the general public as an illegal stock offering to “unaccredited investors,” treat non-wealthy adults like children.

Hedge funds are accused of not being transparent, but much of this is due to the government’s own rules that force them to keep mum. The Supreme Court should take this case, being argued by Harvard law professor Laurence Tribe (also a former counselor to DOJ under the Obama administration), to restore the First Amendment rights of the 99 percent to receive valuable financial information.

“The decision of the lower court is disturbing,” added CEI attorney Hans Bader.  “It allows a state to ban making truthful, non-misleading information available to the public, merely because the speaker sells unregistered (but perfectly legal) securities, out of speculation that such a ban will goad the speaker into registering with the government.”

CEI is joined in the amicus brief by the Cato Institute, securities law expert Antony Page of Indiana University, Deirdre Brennan, publisher of the financial news website FINalternatives, and other prominent financial journalists and academics.

> Read the legal brief on