The Force of the Public Utility Holding Act Has Been Greatly Reduced by Changes in the Securities and Exchange Commission's Enforcement Policies

FGMSD-77-35: Published: Jun 20, 1977. Publicly Released: Jun 20, 1977.

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How well the Securities and Exchange Commission (SEC) carries out its responsibilities in enforcing the Public Utility Holding Company Act of 1935 was evaluated, with primary attention to its enforcement procedures.

The act is designed to protect the public and investors from abuses from the control of gas and electric utility companies by use of holding company devices. Over the years, the SEC has met many of the act's objectives, but not those requiring studies of size, business practices, and controlling influences. The size of many of these companies has increased substantially over the years. Also, such business practices as intercompany loans, dividend payments, and political contributions seem to warrant continuous surveillance. In granting regulatory exemptions, the SEC has relied too much on geographic location of a company's retail services, and not enough on possible detriment to the public interest. Because the energy situation has changed considerably since the act was written, it might be worthwhile to let regulated holding companies engage in fuel and fuel-related businesses.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: SEC should authorize a thorough study of developments in the gas and electric utility industry to evaluate the individual standards and determine the continued overall usefulness of the act. The study should examine whether: the business practices of holding companies and the exercise of improper controlling influences on them are or might be adequately monitored by State and Federal statutes not specifically addressed to these holding companies; the act's standards governing size and structure are now appropriate; continued exemption is detrimental to the public interest and if these exemptions need to be changed; and it is in the public interest to permit public utility companies to engage in fuel-related activities.

    Agency Affected:

 

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