Definition of public utility holding company act of 1935

major landmark in legislation regulating the securities industry, which reorganized the financial structures of holding companies in the gas and electric utility industries and regulated their debt and dividend policies. Prior to the Act, abuses by holding companies were rampant, including watered stock, top-heavy capital structures with excessive fixed-debt burdens, and manipulation of the securities markets. In summary:

1. It requires holding companies operating interstate and persons exercising a controlling influence on utilities and holding companies to register with the Securities and Exchange Commission (SEC) and to provide information on the organizational structure, finances, and means of control.
2. It provides for SEC control of the operation and performance of registered holding companies and SEC approval of all new securities offerings, resulting in such reforms as the elimination of nonvoting stock, the prevention of the milking of subsidiaries, and the outlawing of the upstreaming of dividends (payment of dividends by operating companies to holding companies).
3. It provides for uniform accounting standards, periodic administrative and financial reports, and reports on holdings by officers and directors, and for the end of interlocking directorates with banks or investment bankers.
4. It began the elimination of complex organizational structures by allowing only one intermediate company between the top holding company and its operating companies (the grandfather clause).