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    Aaron M. Nadler v. Securities and Exchange Commission, Securities Corporationgeneral, Intervenor, Dynamics Corporation of America, Intervenor, 296 F.2d 63, 2d Cir. (1961)

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    This document summarizes a court case from 1961 regarding a petition by Aaron Nadler against the Securities and Exchange Commission's approval of a stock sale between two companies. The SEC had granted an exemption allowing the sale. Nadler argued the sale should be voided because the board that approved it was improperly elected. The court upheld the SEC's decision, finding that while the board was not properly elected, the failure was inadvertent. The court also found no evidence of fraud or unfair terms regarding the sale. The SEC and court affirmed that invalidating all actions of an improperly elected board would be an unsound policy harming shareholders.

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    Aaron M. Nadler v. Securities and Exchange Commission, Securities Corporationgeneral, Intervenor, Dynamics Corporation of America, Intervenor, 296 F.2d 63, 2d Cir. (1961)

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    This document summarizes a court case from 1961 regarding a petition by Aaron Nadler against the Securities and Exchange Commission's approval of a stock sale between two companies. The SEC had granted an exemption allowing the sale. Nadler argued the sale should be voided because the board that approved it was improperly elected. The court upheld the SEC's decision, finding that while the board was not properly elected, the failure was inadvertent. The court also found no evidence of fraud or unfair terms regarding the sale. The SEC and court affirmed that invalidating all actions of an improperly elected board would be an unsound policy harming shareholders.

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    Filed: 1961-10-31 Precedential Status: Precedential Citations: 296 F.2d 63 Docket: 26810

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    This document summarizes a court case from 1961 regarding a petition by Aaron Nadler against the Securities and Exchange Commission's approval of a stock sale between two companies. The SEC had granted an exemption allowing the sale. Nadler argued the sale should be voided because the board that approved it was improperly elected. The court upheld the SEC's decision, finding that while the board was not properly elected, the failure was inadvertent. The court also found no evidence of fraud or unfair terms regarding the sale. The SEC and court affirmed that invalidating all actions of an improperly elected board would be an unsound policy harming shareholders.

    Copyright:

    Public Domain
    Download as PDF or read online from Scribd
    Download as pdf
    52 views2 pages

    Aaron M. Nadler v. Securities and Exchange Commission, Securities Corporationgeneral, Intervenor, Dynamics Corporation of America, Intervenor, 296 F.2d 63, 2d Cir. (1961)

    Uploaded by

    Scribd Government Docs
    This document summarizes a court case from 1961 regarding a petition by Aaron Nadler against the Securities and Exchange Commission's approval of a stock sale between two companies. The SEC had granted an exemption allowing the sale. Nadler argued the sale should be voided because the board that approved it was improperly elected. The court upheld the SEC's decision, finding that while the board was not properly elected, the failure was inadvertent. The court also found no evidence of fraud or unfair terms regarding the sale. The SEC and court affirmed that invalidating all actions of an improperly elected board would be an unsound policy harming shareholders.

    Copyright:

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    of 2

    296 F.

    2d 63

    Aaron M. NADLER, Petitioner,


    v.
    SECURITIES AND EXCHANGE COMMISSION,
    Respondent, Securities
    CorporationGeneral, Intervenor, Dynamics
    Corporation of America, Intervenor.
    No. 22, Docket 26810.

    United States Court of Appeals Second Circuit.


    Argued Oct. 11, 1961.
    Decided Oct. 31, 1961.

    Cameron I. Kay, of Hale, Kay & Grant, New York City, for petitioner.
    Mitchell S. Rieger, Associate Gen. Counsel, Securities and Exchange
    Commission, Washington, D.C. (Allan F. Conwill, Gen. Counsel, and
    Paul J. Kemp, Atty., Securities and Exchange Commission, Washington,
    D.C., on the brief), for respondent.
    Bernard D. Cahn, New York City (Arthur W. Murphy and Stephen F.
    Selig, New York City, on the brief), for intervenor Securities Corporation
    General.
    Bruce Bromley, of Cravath, Swaine & Moore, New York City (Allen F.
    Maulsby, Alan R. Finberg, and John W. Barnum, of Cravath, Swaine &
    Moore, New York City, on the brief), for intervenor Dynamics
    Corporation of America.
    Before CLARK, WATERMAN, and MOORE, Circuit Judges.
    PER CURIAM.

    On December 30, 1959, the Securities and Exchange Commission, pursuant to


    17(b) of the Investment Company Act of 1940, 15 U.S.C. 80a-- 17(b), granted
    an exemption of 17(a), thereof, 15 U.S.C. 80a-- 17(a), for a proposed sale by
    Securities Corporation General to Dynamics Corporation of America of its

    stock holdings in a third corporation (Anemostat Corporation of America), and


    also pursuant to 23(c)(3) of the Act, 15 U.S.C. 80a-- 23(c)(3), permitted SCG to
    receive in exchange certain shares of its own preferred stock held by DCA, as
    well as cash. The present petition for review, brought by Nadler as a common
    stockholder of SCG, is from a Commission order of December 23, 1960,
    holding that no basis exists to revoke the prior order. Nadler's attack is based
    upon the claim that the SCG directors who sought the exemption were
    improperly chosen under 16(a) of the Act, 15 U.S.C. 80a-- 16(a)-- being elected
    by the board of directors, rather than by the shareholders at a shareholders'
    meeting. The Commission, after hearing, found that there was a failure to
    comply with this provision, but that the failure was inadvertent and the persons
    involved were the major beneficial owners of the company and could have
    elected the same persons as directors and did so at the next regular
    stockholders' meeting in accordance with 16(a). Then it made an extensive
    review of the evidence and found that there was no evidence of fraud or
    overreaching in the transation and that the terms and considerations of the
    transaction were fair and reasonable. So it declined to revoke its exemption.
    2

    These findings, which are supported by the evidence, are crucial against the
    petitioner's claim. We see no basis for the conclusion that all acts by a board not
    chosen as required by 16(a) must be considered void. The statute indicates that
    such a board has power to take action to secure a properly chosen board within
    a sixty-day period, which may be extended by the Commission. It would be an
    unsound policy, fraught with harm to the shareholders, to have everything done
    by such a board to carry on the corporation's normal business, especially within
    the statutory period, declared invalid. The Commission acted properly in
    carefully scrutinizing transactions during the interim period and in not voiding
    transactions found to be reasonable and proper in themselves. Nadler's further
    claims of inadequate hearing and lack of notice must fall because of the
    undoubted fact that eventually he was given a very full hearing.

    Affirmed.

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