New Legal Conditions for Reading Vorpal Trade

Back in 1985 the Securities and Exchange Commission lost a legal case against a newsletter publisher. The SEC insisted that the publisher was a financial advisor. The publisher insisted that they were exercising their First Amendment rights. The U.S. courts ruled in favor of the publisher against the SEC.

I don't know whether that seems unfair to you not, but consider another situation:  A publisher of information doesn't know what the reader will do with it. The reader could invest $1000, nothing, or $100,000,000. Suppose the reader invests $100 million, loses half of it, and sues the publisher to make them whole, even though they paid the publisher just $100 for an annual subscription. Do you think the publisher is liable for the losses? Let's suppose you do, and take the tentative position that the publisher really does owe the reader some compensation for the bad advice.

So let's back up, then, to the moment just before the reader placed their subscription order. These thoughts occurred to them:

1. "If I invest $100 million, and lose half, then I'm out a bunch of money, and its my fault."
2. "But if I can invest $100 million, lose half, and sue the publisher, then maybe I won't lose anything because the publisher has to reimburse me!"
3. "On the other hand, if I invest $100 million and my investment goes up by $50 million, then I keep the whole thing and don't have to share the profits. I keep the whole thing."
4. "There's no way to lose! If I make money, I keep it, and if I lose money, I blame it on the publisher and I break even. Yahoo!"
5. "Boy, that newsletter publisher sure is stupid!"

In other words, if you assign strict liability to the publisher for bad calls, then they take on unlimited liability for trillions of dollars of losses, without any possible sharing of gains. Were this to become legal precedent, then no advice would ever be given to anyone ever again. And that would include medical and legal advice, not just financial advice, or even just a few comments in a blog about financial matters.

So, in response, we have posted our legal page with our terms and conditions for reading Vorpal Trade. We think it highlights just how absurd, in an artistic sort of way, many legal contracts can be when they are trying to remove obstacles from the path of truth.

(P.S.: There is no resemblance whatsoever between the DOJ legal case against S&P and our contract. None whatsoever.)

2/9/13 Update:
Various materials regarding the First Amendment and the SEC's regulatory operations that have come into opposition with the Constitution:
Wall Street Journal, 9/5/12:  The SEC and the First Amendment
The New Capitalist, 3/11/11:  The SEC’s Problem With the First Amendment
Forbes (warning: many advertisements), 9/18/12:  Under Congressional Mandate, SEC Slowly Moves Towards Recognition of First Amendment

Restrictions on securities solicitations are a response to abuses of the 1920s and 1930s. SEC rules about solicitations are intended to curtail activity that could result in the sale of inappropriate securities to unsophisticated investors. Forbes' Glenn G. Lammi:  "SEC Chairman Schapiro seems sympathetic to the concerns voiced in letters from various activist groups that freer speech will unleash a flood of fraudulent activity."