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The Supreme Court found that the SEC's original order was invalid as there was no lack of disclosure or fraud in the preferred stock purchase. The subsequent order approving the amended plan was also improper as it was based solely on judicial authority. Officers and directors of a corporation do not have a fiduciary duty to its stockholders that precludes them from buying and selling the corporation's stock. The SEC's denial of Federal Water and Gas Corp.'s application for an amendment to the reorganization plan was reversed by the Court of Appeals, and the case was remanded to the Commission. The SEC has the discretion to use rule-making or individual orders to address unforeseeable problems, and retroactive application of a new standard of conduct is allowed if the harm is not greater than the ill effect of retroactivity. The SEC's decision to deny effectiveness to the proposed amendment to the Federal reorganization plan was justified based on the particular facts of the case, the Commission's general experience in reorganization matters, and its informed view of statutory requirements. The court cannot overturn the Commission's conclusion in this case as the facts are undisputed, and the Commission has made an informed and expert judgment, taking into account the subtle factors that led to the enactment of the Public Utility Holding Company Act of 1935.
The dissenting opinion in this case disagrees with the Court's decision to uphold an administrative order that requires certain individuals to surrender their preferred stock to the corporation at a price lower than its value. The dissent argues that this order is not related to the Commission's duty to determine the fairness of the reorganization plan and undermines the purpose of judicial review. The Court's reliance on administrative experience alone is not sufficient to justify the order, and the absence of a legal or regulatory basis cannot be overlooked. The passage raises questions about the significance of administrative experience in legal matters and the interpretation of statutes, and whether it should be definitive in fact-finding or simply one factor to take into account.
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