U.S. Supreme Court
Electric Bond & Share Co. v. SEC, 303 U.S. 419 (1938)
Electric Bond & Share Co. v. Securities and Exchange Commission
Argued February 7, 8, 9, 1938
Decided March 28, 1938
303 U.S. 419
1. A system of holding companies controlled, through stock ownership, the operations of subsidiary companies which served gas and electricity to the public in many States, partly in interstate commerce. Some of the holding companies were themselves partly engaged in selling, purchasing, or transmitting electricity across state lines. The system furnished expert service, and performed construction work, for the subsidiary utilities, and, in so doing, made continuous and extensive use of the mails and the instrumentalities of interstate commerce. And such instrumentalities were from time to time used in other transactions, such as the distribution of securities. Held that the holding companies were engaged in activities within the reach of congressional regulation. P. 303 U. S. 431.
2. Section 5 of Title I of the Public Utility Act of Aug. 26, 1935, requires holding companies, as defined, to register with the Securities and Exchange Commission and to file a registration statement giving information with respect to the organization, financial structure, and nature of the business of the registrants, together with various details of operations. Section 4(a) prohibits the use of the mails and the facilities of interstate commerce to those companies which fail to register. Section 32 provides that, if any provision of the Title should be held invalid, the others shall not be affected. Held:
(1) The separability clause reverses the presumption of inseparability. P. 303 U. S. 433.
(2) Sections 4(a) and 5 are not so woven into the Title that there is any inherent or practical difficulty in enforcing them separately while reserving all questions as to the validity of the other provisions of the Title. P. 303 U. S. 434.
(3) Although registration underlies and precedes the application of the other regulatory provisions, §§ 4(a) and 5 were intended to be independently operative and enforceable as regulations requiring holding companies to furnish the information called for by § 5(b) in registration statements. P. 303 U. S. 435. chanroblesvirtualawlibrary
(4) The legislative history of the Act is consistent with this view. P. 303 U. S. 438.
3. Corporations engaged in interstate commerce cannot escape regulation by acting through subsidiaries. P. 303 U. S. 440.
4. In view of the relation of the holding companies in this case to interstate commerce, and to the national economy, Congress had power to exact of them the information required by § 5 of Title I of the Public Utility Act, and to visit their failure with the penalties prescribed by § 4(a), restraining their use of interstate commerce and postal facilities while they remain holding companies and refuse to register. P. 303 U. S. 439.
5. In a suit by the Securities and Exchange Commission under § 18(f), Title I, Public Utility Act, brought to enforce only compliance with §§ 4(a) and 5, the requirements and validity of the other provisions of the Title not being involved in the actual controversy, held that a counterclaim and cross-bill by which the defendants invoked the Federal Declaratory Judgment Act, and sought to have the other provisions declared unconstitutional, was properly dismissed. P. 303 U. S. 443.
92 F.2d 580 affirmed.
Certiorari, 302 U.S. 681, to review the affirmance of a decree of the District Court which granted an injunction and dismissed a counterclaim and cross-bill in a suit against numerous corporations, brought by the Securities and Exchange Commission under § 18(f) of Title I of the Public Utility Act of 1935. Other corporations had intervened in the District Court as defendants. The injunction forbade the holding company defendants, as long as they continued to be holding companies and failed to register, from using the mails or the facilities of interstate commerce as banned by § 4(a) of the Act. The counterclaim and cross-bill prayed for a declaratory judgment declaring the whole Title void, and that the Commission and its members, the Attorney General, and the Postmaster General be enjoined from enforcing any of its provisions. See the opinion of Mack, Circuit Judge, in 18 F.Supp. 131. chanroblesvirtualawlibrary