Chenery Corp. v. SEC
United States Court of Appeals for the District of Columbia Circuit
154 F.2d 6 (1946)
Chenery Corporation (plaintiff) held a controlling block of voting stock in Federal Water Service Corporation and, to preserve that control during Water Service's SEC-supervised reorganization, bought additional shares. The SEC (defendant) ruled that any officer or director's purchase of stock in a corporation undergoing reorganization was categorically unlawful, regardless of good or bad faith or any other mitigating factor, and ordered Chenery to divest the newly acquired shares. Chenery challenged the ruling in federal court.
Whether the SEC may create a general rule forbidding officers and directors of a corporation undergoing reorganization from buying the corporation's securities, regardless of good faith.