The Chenery's (P) were officers, directors, and controlling shareholders of the Federal Water Service Corporation. They were subject to reorganization under the Public Utility Holding Company Act. From 1937-4, P's negotiated with the SEC over the terms of a proposed voluntary reorganization that called for the merger of Federal with certain affiliated corporations into a single new corporation with one class of common stock. P's were unsuccessful in persuading the SEC to authorize holders of class B common stock to exchange these shares for common stock in the reorganized company. Participation was limited by the SEC to preferred stock and class A common with the preferred shareholders getting 94.7 percent of the common. During the negotiations, Ps purchased 12,407 shares of preferred stock. They purchased those preferred shares at substantially less than book value, and that sum of stock would have been entitled to more than 10 percent of the reorganized company's common shares. The Commission found that it could not approve the proposed plan so long as the preferred shares acquired by Ps would be permitted to share on a parity with other preferred stock. There was no finding of fraud or a lack of disclosure, but they reasoned that P's managers were fiduciaries and under a duty of fair dealing not to trade in the securities of the corporation while plans for its reorganization were before the Commission. The Commission plan then stated that the preferred stock held by Ps could not be traded in but must be surrendered at cost plus 4 percent interest. The Commission approved the plan, and Ps appealed.