Royalist Victory

Last week the U. S. Supreme Court handed down its first decision on the Securities Act of 1934. The case originated last year after J. Edward Jones, dealer in oil royalties, filed a registration statement with the Securities & Exchange Commission. Summoned to explain his facts & figures, Royalist Jones suddenly changed his mind, tried to withdraw the statement. This SEC forbade him to do (TIME, July 1).

Proclaiming his inalienable right to withdraw his registration so long as it had not become effective, Oil Royalist Jones finally found support for his contention last week. Said Justice Sutherland in a 6-to-3 decision: ''We are unable to see how any right of the general public can be affected by the withdrawal of such an application before it has gone into effect. . . . The conclusion seems inevitable that an abandonment of the application was of no concern to anyone except the registrant. . . . The Commission itself had challenged the integrity of the registration statement and invited the registrant to show cause why its effectiveness should not be suspended. In the face of such an invitation, it is a strange conclusion that the registrant is powerless to elect to save himself the trouble and expense of a contest by withdrawing his application."

Justices Stone, Brandeis and Cardozo held that SEC's rule was "wisely conceived and lawfully adopted to spoil the plans of those intent upon obscuring or suppressing the acknowledgment of their knavery."

Expressly avoided in the Jones decision was any opinion on the Securities Act's constitutionality. That pillar of New Deal reform stood unrocked. But Justice Sutherland was profoundly disturbed by the administration of the Act in the case of Royalist Jones. Said he:

"The action of the Commission finds no support in right, principle or in law. It is wholly unreasonable and arbitrary. It violates the cardinal precept upon which the constitutional safeguards of personal liberty ultimately rest--that this shall be a government of laws. . . . Arbitrary power and the rule of the Constitution cannot both exist. They are antagonistic and incompatible forces; and one or the other must of necessity perish whenever they are brought into conflict."

Broadening into what seemed a stern lecture to the New Deal as a whole, the Justice continued: "To escape assumptions of such [arbitrary] power on the part of the three primary departments of the Government is not enough. Our institutions must be kept free from the appropriation of unauthorized power by lesser agencies as well. And if the various administrative bureaus and commissions, necessarily called and being called into existence by the increasing complexities of our modern business and political affairs, are permitted gradually to extend their powers by encroachments--even petty encroachments--upon the fundamental rights, privileges and immunities of the people, we shall in the end, while awaiting the fatal consequences of a supreme autocracy, become submerged by a multitude of minor invasions of personal rights, less destructive but no less violative of constitutional guarantees."

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