Sec v. Chenery Corp., 318 U.S. 80 (1943)

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Securities and Exchange Commission v. Chenery Corporation

No. 254

Argued December 17, 18, 1942
Decided February 1, 1943
318 U.S. 80

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA

Syllabus

By an order of the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935, approval was given, over objections, to a plan for the reorganization of a registered holding company, whereby preferred stock which had been acquired by officers and directors of the company while plans for its reorganization were before the Commission would not be converted into stock of the reorganized company, as would all other preferred stock, but would be surrendered at cost plus interest. The Commission explicitly based its order on its view of principles of equity judicially established. However, the Commission did not find, but, on the contrary, disavowed, that the specific transactions showed misuse by the officers and directors of their position as reorganization managers, or that, as such managers, they took advantage of the corporation, other stockholders, or the investing public.

Held:

1. On review under § 24(a) of the Act, the validity of the order of the Commission must be judged on the grounds upon which the record discloses that its action was based. P. 87.

2. Tested by principles of equity judicially established, the order of the Commission can not be sustained. P. 88.

3. It is immaterial that the Commission might have made findings which would justify its order as an appropriate safeguard of interests which the Act was designed to protect. Such findings are essential to the validity of the order, and here there is none. P. 94.

4. Such an administrative order can not be upheld if not sustainable by the grounds upon which it was based by the Commission. P. 95.

75 U.S.App.D.C. 374, 128 F.2d 303, remanded.

Certiorari, 317 U.S. 609, to review a judgment setting aside an order of the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935.