SEC v. Chenery Corp. (Ii)

332 U.S. 194 (1947)

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Nature of the Case

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Facts

In approving a plan for the reorganization of a holding company under the Public Utility Holding Company Act of 1935, the SEC required that preferred stock purchased by the management without fraud or concealment while plans of reorganization were before the Commission should not be converted into stock of the reorganized company, like other preferred stock, but should be surrendered at cost plus interest. In SEC v. Chenery Corp., 318 U. S. 80, the Court held that this requirement could not be sustained on the sole ground upon which it was based by the Commission -- i.e., principles of equity judicially established. On remand, the Commission reexamined the problem and reached the same result, but based this requirement on the ground that to permit the management to profit from purchases of stock made while reorganization proceedings were pending would be inconsistent with the standards of §§ 7 and 11 of the Act. The Commission reaffirmed its prior ruling under the standards set forth in Sections 7 and 11 of the Act. The Commission drew heavily upon its accumulated experience in dealing with utility reorganizations. The case once again made it to the Supreme Court.