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Word Count: 500
Created in the post-Depression era the Securities and Exchange Commission SEC acts to protect investors by regulating financial speech The US Supreme Court has ruled in instances such as the TGS case that this regulation is not unfair censorship even though it means some speech is compelled Rule 10b-5 is one such SEC regulation which compels speech by prohibiting fraudulent or misleading corporate communications in any context relevant to investors according to Zelezny 334In the decision in the TGS case Securities and Exchange Commission v Texas Gulf Sulphur Co 1968 The US Court of Appeal for the Second Circuit set a precedent on Rule 10b-5 Texan Gulf Sulphur TGS had been drilling for copper and zinc in eastern Canada Top people in the company knew of these attempts and their potentially lucrative results The company moved ahead with drilling and land acquisition but did not release reports to the public After rumors of a strike were publicized in national papers TGS circulated a press release stating the project had not yielded definite results yet The SEC prosecuted a complaint regarding Rule 10b-5 and the failure of TGS to release information to stockholders and the general public The court ruled that company insiders were trading stock unfairly because they had access to information which allowed them to make more informed decisions than the rest of the public Also it was decided that the press release circulated by TGS was misleading in a way that would cause a reasonable investor to believe the ore strike was less significant than it was Though TGS contended that ruling a10b-5 violation for its negligence in the release was against its First Amendment rights the court disagreed In ruling that corporate reports are a kind of speech a precedent was set In denying the appeal the court held that both stockholders and the investing public must be kept informed of information that could impact their decision to invest or sell shares
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