Securities and Exchange Commission v. Chenery Corp.

The SEC (defendant) required Chenery (plaintiff), which held voting common stock controlling a utility undergoing reorganization, to divest preferred stock it had acquired anticipating a mandated stock conversion, justifying this solely on its understanding of judicial precedent barring management stock trading during reorganization; on appeal, the SEC additionally argued its order should be upheld based on its agency expertise, even though it had not invoked that rationale in the original order, and the court of appeals set the order aside.