In the case of Securities and Exchange Commission v. Chenery Corporation et al., 1942, the U.S. Supreme Court ruled in favor of the Securities and Exchange Commission (SEC). The SEC had previously ordered a reorganization plan proposed by Chenery Corp's management to be voided due to their failure to disclose that they personally stood to profit from it. This was seen as a violation of fiduciary duties under federal securities laws. However, this decision was overturned by an appeals court on grounds that there were no existing rules or precedents for such cases at that time. The Supreme Court reversed this ruling, stating that administrative agencies like the SEC are not strictly bound by judicial precedent but can establish new principles when necessary based on facts presented during proceedings. It held that while courts may set aside agency actions if found arbitrary or capricious, they should defer to agency expertise in matters within their jurisdiction unless clearly erroneous.

In the dissenting opinion for SECURITIES AND EXCHANGE COMMISSION v. CHENERY CORPORATION, Justice Frankfurter argued that the Securities and Exchange Commission (SEC) should not be allowed to make decisions based on policy considerations rather than established legal principles. He contended that this approach undermines predictability in law and could lead to arbitrary decision-making by administrative agencies. Furthermore, he expressed concern about the potential for abuse of power if agencies are permitted to act outside of clear statutory guidelines or common-law rules. In his view, it was inappropriate for the SEC to deny approval of a reorganization plan simply because it disapproved of certain stock transactions carried out by company insiders during bankruptcy proceedings - something which was not expressly prohibited under existing laws or regulations at that time.