RUTLEDGE, Associate Justice.
This is a-petition of the American Gas and Electric Company to review an order of the Securities and Exchange Commission.1 The order denied petitioner’s application for an order, pursuant to Section 2(a) (8) of the Public Utility Holding Company Act of 1935, declaring it to be not a subsidiary of Electric Bond and Share Company.2
[635] Petitioner and Bond and Share are both registered holding companies under the Act. Petitioner is a New York corporation which owns directly all of the outstanding securities of eleven electric utility companies which supply electric light and power to approximately 830,000 customers in New Jersey, Pennsylvania, Ohio, Indiana, Michigan, Virginia, West Virginia, Kentucky and Tennessee.3 Through its wholly-owned subsidiary, American Gas and Electric Service, petitioner furnishes its operating companies with management and supervisory services.
As of March 30, 1940, petitioner’s capitalization consisted of 355,623 shares of 4% per cent cumulative preferred stock (par $100) and 4,482,737 shares of common stock (par $10). Both common and preferred shareholders are entitled to one vote per share.4 Bond and Share owns 846,985 shares of common stock, which constitute 17.51 per cent of the outstanding voting securities.5
Petitioner is therefore a subsidiary of Bond and Share under clause (A) of Section 2(a) (8).6 However, petitioner maintains that it satisfies the conditions prescribed by the last paragraph of clause (B) of Section 2(a) (8), that (1) it is not controlled, directly or indirectly, by Bond and Share; (2) it is not an intermediary company through which control of another company is exercised; and (3) its manage[636] ment and policies are not subject to a controlling influence, directly or indirectly, by Bond and Share so as to make it necessary or appropriate in the public interest or for the protection of investors or consumers that it be subject to the obligations, duties and liabilities imposed by the Act upon subsidiary companies of holding companies.
The Commission concluded that the evidence would not support a declaration under (3), that petitioner was not a subsidiary of Bond -and Share and therefore no findings were made on the question of “control” under (1) and (2). This petition presents the single question whether there is substantial evidence to support the Commission’s findings that petitioner’s management and policies are subject to a “controlling influence” of Bond and Share so as to make it necessary or appropriate in the public interest that petitioner be subject to the Public Utility Holding Company Act as a subsidiary of Bond and Share.7
Petitioner’s principal argument is that the Commission fell into error in arriving at the ultimate fact of “controlling influence” by drawing inferences from past relationships between petitioner and Bond and Share which are “directly contrary to substantial, direct, contemporaneous and uncontradicted evidence dealing with the present situation.” The Commission stated its position as follows: “We believe * * * that the facts set out * * * show past relationships between applicant [petitioner] and Bond and Share which clearly ‘have resulted in a personnel and tradition which make applicant [petitioner] responsive to Bond and Share’s desires He Hí * > ”8
The facts which sustain the Commission’s findings are substantially as follows.
Organization. Petitioner was organized by Bond and Share in 1906 to purchase all the assets of the Electric Company of America, which consisted principally in securities of utility companies, which were controlled by the Electric Company and which served communities in Illinois, Indiana, New Jersey, New York, Ohio, Pennsylvania and West Virginia. The details of petitioner’s organization were ■handled by Bond and Share’s board of directors and general counsel. Eleven of the fifteen original directors and all the original officers were affiliated with either Bond and Share or its general counsel.
Petitioner’s original capitalization consisted of $6,282,000 99-year 5 per cent collateral trust bonds, $3,500,000 preferred stock, and $3,500,000 common stock. The $6,282,000 collateral trust bonds were issued at the time of the organization in return for the Electric Company properties. At ■ the time of organization $2,500,000 (at par) of common and $1,200,000 (at par) of preferred stock were also issued. Of the common stock, $1,300,000 was used for promotion costs, Bond and Share retaining $235,000 for its part in petitioner’s organization. Bond and Share sold the remaining $1,200,000 of common and the $1,200,000 of preferred stock for $1,200,000. At the end of the organization transactions Bond and Share retained for itself 4,856 shares of common stock, which amounted to 9.7 per cent of petitioner’s outstanding voting securities. Bond and Share’s holdings of petitioner’s voting securities remained at [637] approximately 9.7 per cent until 1929. They rose to 17.51 per cent in 1929 and 1930.
Management. Petitioner’s board of directors has consisted, from its organization, generally of 15 members, although in some years it has fluctuated between 14 and 16. As shown above, the original board consisted of 11 Bond and Share men. According to the Commission’s findings “most of the key men in American Gas [petitioner] were taken into the organization at a time when it was clearly controlled by Bond and Share.” The Commission states its position in its “conclusions” that “it is fair to infer that Bond and Share believed them to be friendly to its interests at the time they were selected. Moreover, these men are indebted for their advancement over the years and for their present status to Bond and Share and the Bond and Share management.” These facts, the Commission found, show past relationships which have resulted in “personnel and tradition” which cause the petitioner to be responsive to Bond and Share.
Petitioner concedes that during the years when Bond and Share acted as petitioner’s fiscal agent, during most of which it had a material representation on petitioner’s board and executive committee, Bond and Share “had such an influence in the affairs of American Gas [petitioner] as could properly have been called a ‘controlling influence’ over its ‘management or policies’ had the Act been in effect in those years.” Bond and Share’s functioning as petitioner’s fiscal agent ceased in 1928-31. Since 1931 petitioner has handled its own financing, and Bond and Share’s representation on petitioner’s board has diminished until only two of the fifteen directors and one member out of five on the executive committee have any formal connection with Bond and Share. As a part of Bond and Share’s diminishing influence petitioner’s officers have resigned from the boards of acknowledged subsidiaries in the Bond and Share system. Petitioner says these facts show the Commission’s conclusion that “past relationships * * * have resulted in a personnel and tradition making petitioner responsive to Bond and Share’s desires” is not supported by substantial evidence, because the basic facts relied on by the Commission do not give a rational or coherent support to the Commission’s inferential findings.
The Commission relies on the following facts for the basis from which to infer “a personnel and tradition.”
The chairman of petitioner’s board of directors and executive committee from its organization until the present time has been a man of authority and influence in the Bond and Share’s system. S. Z. Mitchell held that position from 1907 until his retirement in 1933. Mitchell was in charge of petitioner’s financial policies and was influential with its growth and development through the acquisition of new properties. During this same period he served as a director and member of the executive committee of Bond and Share from its organization in 1905 to 1933; he was president of Bond and Share for 20 years and chairman of its board of directors from 1923 to 1933; when American Power and Light Company and Electric Power and Light Corporation, both registered holding companies and acknowledged subsidiaries of Bond and Share, were organized in 1909 and 1925, respectively, Mitchell became chairman of their boards of directors and member of their executive committees; and from 1925 to 1933 he was also chairman of the board of the National Power and Light Company, similarly a registered holding company and an acknowledged subsidiary of Bond and Share.
Upon Mitchell’s retirement in 1933 C.E. Groesbeck assumed the key positions in the management of petitioner, Bond and Share, and the remaining holding companies in the Bond and Share system. In 1935 Groesbeck resigned from the boards of directors of American Power and Light Company, National Power and Light Company, and Electric Power and Light Corporation. However, he still retains his positions as chairman of both petitioner’s and Bond and Share’s boards of directors and executive committees. But he draws no salary from petitioner. As chief executive of Bond and Share he draws its top salary.
Petitioner’s chief operating executive is its president, G. N. Tidd. He became petitioner’s vice president in 1910, and president in 1923. Prior to 1910 he had managed the Indiana properties of the Electric Company, and was transferred to petitioner’s operating personnel when it acquired these properties. As petitioner’s president, Tidd has been responsible to the executive committee, whose chairman has been Bond and Share’s chief executive and the majority of whose members were directors of Bond [638] and Share or of acknowledged subsidiaries in the Bond and Share system. Also, the Commission put considerable emphasis on the fact that Tidd served as petitioner’s vice president and president during the period of its growth at a time when its management and policies were admittedly subject to a controlling influence of Bond and Share. Tidd has been a member of the board of directors and executive committee of a number of Bond and Share’s acknowledged subsidiaries during the years he has served as president of petitioner. He resigned from these positions between 1935 and 1939.
The findings of the Commission show that between 1907 and 1935, close to a majority, and in 1931-32, an actual majority, of petitioner’s board of directors were directors, officers or employees of Bond and Share or of companies in the Bond and Share system. However, since 1936, the number of Bond and Share affiliates on petitioner’s board has been reduced, and some of the members who have remained on the board have resigned from their Bond and Share affiliations.
Of the present 15 directors making up petitioner’s board, i. e., as of July, 1940, two, C. E. Groesbeck and Frederick A. Farrar, are directors of Bond and Share, Groesbeck being chairman of the board of both companies and Farrar being retired and inactive; two other members, G. N. Tidd and Henry H. Wehrhane, were directors of acknowledged Bond and Share subsidiaries for many years; Tidd is petitioner’s president and a member of its executive committee, and Wehrhane. is also a member of petitioner’s executive committee ; two other members, Frank B. Ball and M. F. Millikan, according to the findings of the Commission “trace their associations, advancement and present status” with petitioner to actions of the board of directors and executive committee in years when these bodies admittedly were under the controlling influence of Bond and Share; two other members, Harrison Williams and J. F. McMillan, have no connection with Bond and Share, but have served petitioner for many years in cooperation with Bond and Share; Williams, the head of the North American Company, has served for more than thirty years on petitioner’s board and executive committee and McMillan, petitioner’s assistant treasurer, has been employed by petitioner since 1909; for the remaining seven directors the Commission has not imputed any responsiveness to Bond and Share’s desires; of the seven, one is a vice president working on financing, three represent substantial holdings of petitioner’s stock, two are incapacitated and inactive, and one is newly appointed!
Of petitioner’s executive committee, the Commission found that from 1910 to 1936 a clear majority were directors of Bond and Share or acknowledged subsidiaries in the Bond and Share system. In 1940, after some of petitioner’s directors had resigned from Bond and Share affiliations, only one member of petitioner’s executive committee was affiliated with Bond and Share. Petitioner’s present executive committee as shown by the record consists of Groesbeck, Bond and Share’s chief executive, as chairman, Tidd and Wehrhane, recently resigned from Bond and Share affiliations, Williams, head of the North American Company, who has served on petitioner’s executive committee since its organization, and Cresswell, representing a large holding of petitioner’s stock.
Financing. For 25 years, from 1906 to approximately 1932, Bond and Share as petitioner’s fiscal agent conducted all the financing operations for petitioner and its subsidiaries. Petitioner concedes that during this period Bond and Share exercised a “controlling influence” over petitioner’s management and policies, but insists that it ended when petitioner took charge of its own financing. Between 1932 and 1937 petitioner engaged in no important financing operations. Since 1937 petitioner and its subsidiaries have completed refinancing operations involving the sale of $250,500,-000 of securities to underwriters without the aid of Bond and Share. Petitioner has used the same investment houses for syndicate leaders as have been used by Bond and Share before and since 1932. Much of the legal work for petitioner’s refinancing operations was done by members of the staff of Bond and Share’s general counsel. Until 1938, petitioner and Bond and Share employed the same law firm as general counsel.
The record shows that Bond and Share was well compensated for its services as petitioner’s fiscal agent prior to 1932. During the period between 1920 and 1932 Bond and Share received more than $2,000,000 for these services. Between 1907 and 1928 Bond and Share made numerous unsecured loans to petitioner and between 1921 and [639]*6391930 petitioner made many loans to acknowledged subsidiaries of Bond and Share.
Bond and Share’s stock ownership. Between 1907 and 1929 Bond and Share owned approximately 9.7 per cent of petitioner’s outstanding voting securities. In 1929 and 1930 Bond and Share’s holdings increased to 17.51 per cent. These holdings constitute Bond and Share’s most important investment and its chief source of income. In 1939 Bond and Share derived 47.5 per cent of its total income from this investment in petitioner’s common stock.
None of petitioner’s other shareholders, who number almost 20,000, or any organized group, owns as much as four per cent of its voting stock. For many years Bond and Share’s holdings have accounted for approximately 25 per cent of all the votes cast at petitioner’s stockholders’ meetings.
The record shows that the 27 largest shareholders of petitioner’s voting stock, including Bond and Share, own a total of 1,853,498 shares. Some of this group are represented on petitioner’s board of directors. Excluding Bond and Share’s 846,-985 shares, the remaining 26 members of this group hold 1,006,513 shares. Petitioner argues that should a proxy fight occur it can be assumed that this group would vote with petitioner’s management against Bond and Share. It is not necessary to speculate who would get control of the proxies in such a case. The evidence does not show anything but friendliness and cooperation between the managements of the two companies. There is no evidence that there has ever been a proxy fight in petitioner’s history. Moreover, included in this group of 26 largest stockholders are shareholders who are admittedly Bond and Share men. Thus petitioner’s largest stockholder, other than Bond and Share, is Mitchell, former chairman of the board of Bond and Share, who together with his wife owns 160,710 shares or 3.3 per cent of petitioner’s voting stock. This makes it all the more impossible to speculate by inference that the nine directors who own or vote approximately four per cent of petitioner’s stock or the group of 26 stockholders might combine to outvote Bond and Share at meetings of directors and stockholders. The very fact that it would take such a large and organized group of petitioner’s 20,000 stockholders to outvote Bond and Share shows Bond and Share’s substantial position in holding such a large single block of petitioner’s voting securities.
Of the number of shares voted at the stockholders’ meetings since 1927, more than 95 per cent have been cast by proxy. Bond and Share has always sent its proxies to petitioner’s proxy committees. From 1923 to 1938, every member of petitioner’s proxy committees was either an officer or a director of Bond and Share or of one of its acknowledged subsidiaries. In 1940, Tidd having resigned from his Bond and Share affiliations, no member of petitioner’s proxy committee had any formal Bond and Share affiliations.
Maintenance of separate managerial and operating staffs. Prior to 1935 Bond and Share rendered, for compensation, operating services to its acknowledged subsidiaries. Since 1935 a wholly-owned subsidiary, Ebasco Services, Inc., has continued to perform these services. However, neither Bond and Share nor Ebasco has ever rendered any operating services to petitioner and its subsidiaries. Petitioner has itself performed these services for its own holding company system.
The Commission considered these matters primarily of “local concern” and gave as a reason that at the time of petitioner’s organization it had its own operating staff which had been taken over from the Electric Company of America.
Petitioner's “direct contemporary evidence” showing that neither its management nor its policies arre “presently subject” to a controlling influence of Bond and Share. Petitioner offered evidence to show that the filing of a formal plan by petitioner under Section 11(e) of the Act was effected in opposition to Groesbeck and other members of the Bond and Share management. The evidence shows that in response to a letter from the Chairman of the Commission requesting all registered holding companies to submit suggestions, even though they might be tentative, for compliance with Section 11 of the Act, petitioner prepared a formal plan as an application for integration under 11(e), while Bond and Share proposed to submit only tentative proposals for the integration of its system and included petitioner’s properties in these proposals.
At a conference in October, 1938, between the officers of the two companies, the president of Bond and Share stated its position that it would be unwise to submit a formal plan and urged the officers of the petitioner to abandon their intention of filing a formal plan. But petitioner’s [640] officers expressed their conviction that, a plan under Section 11(e) was a sound and appropriate course for petitioner to pursue. The formal plan was thereafter filed with the Commission. A second incident in connection with petitioner’s 11(e) plan occurred at a meeting of petitioner’s executive committee in November, 1939, about a year after the plan had been filed. At this meeting Groesbeck urged petitioner’s officers to withdraw the Section 11(e) plan and file only an informal plan as other holding companies were doing. Petitioner’s attorney expressed his opinion that it had not been a mistake to file the Section 11(e) plan and that, even though the question might be debated, it would be a serious mistake to attempt to withdraw the plan.
Petitioner argues that here was a “direct contemporaneous” attempt by Bond and Share to exert its influence to control petitioner’s integration policy and the: attempt failed. “And Bond and Share, itself impotent of controlling influence over petitioner, is asking the Commission to help it force petitioner into the Bond and Share program.” Bond and Share included petitioner’s properties in its integration proposals.
The Commission stated that this matter was not the subject of any substantial controversy between petitioner and Bond and Share. The resolution authorizing the filing of petitioner’s formal plan under Section 11(e) was unanimously adopted by petitioner’s board of directors, without a dissenting vote by Groésbeck or Farrar, the representatives of Bond and Share on petitioner’s board. Also,' at the time of the consideration of petitioner’s plan, petitioner had filed its application for an order declaring it not to be a subsidiary of Bond and Share and the resolution authorizing this application also was adopted by a unanimous vote of petitioner’s board of directors.
Another material contention between petitioner and the Commission is over the differences in the substance of petitioner’s formal plan and Bond and Share’s tentative proposals for the integration of petitioner’s companies. Petitioner argues that Bond and Share is attempting to retain petitioner’s properties in the Bond and Share system by its proposals for integration. Bond and Share’s program calls for “changes in ownership of property, exchanges, sales, purchases and so forth” in each of the proposed property groups built around “the four principal holding companies,” one of which is petitioner. The Commission’s view of petitioner’s formal plan and Bond and Share’s tentative proposals is that there is no material difference in the substance of the two plans. “Under both proposals, if the Commission were to accept the plans, as filed, petitioner and its system would remain substantially unchanged.”9
The court’s function, after consideration of the factual data set out above, is to ascertain whether the Commission’s order dismissing petitioner’s application, . and thereby refusing to declare petitioner not subject to a “controlling influence” of Bond and Share and not a subsidiary of Bond and Share under Section 2(a) (8) (B) of the Act, is supported by substantial evidence.10 There is no disagreement as to the basic facts. Petitioner’s position is that the Commission’s conclusions are based entirely on “past relationships,” which are not sustained by substantial evidence when faced with details of the present situation.
The issue posed by the statute’s negative is whether the evidence is of such a compelling character as to have required [641] the Commission to find that petitioner’s management and policies are not subject to a “controlling influence” of Bond and Share. The record may be such as to sustain either a negative or an affirmative finding by the Commission. Kansas City Power & Light Co. v. National Labor Relations Board, 8 Cir., 1940, 111 F.2d 340, 349. The judicial function is exhausted when there is found a rational basis for the conclusions of the Commission after a fair and adequate hearing.11 Although the initial burden is on petitioner to prove to the Commission that its management and policies are not subject to Bond and Share’s “controlling influence,” the Commission’s function is to make an adequate and fair appraisal of the weight and credibility of the evidence.12
As the Commission has stated in H. M. Byllesby & Company, 1940, 6 S.E.C. 639, 651, “it seems clear that Congress meant by the term ‘controlling influence’ something less in the form of influence over the management or policies of a company, than ‘control’ of a company.” While the existence of “control” constitutes an absolute bar under clauses (i) and (ii) of Section 2(a) (8) (B) for declaring a company not to be a subsidiary, attached to the phrase “subject to a controlling influence” is “so as to make it necessary or appropriate in the public interest or for the protection of investors or consumers that the applicant be subject to the obligations, duties, and liabilities imposed in this chapter upon subsidiary companies of holding companies.”13 (Italics supplied.) As “control” may take many different forms, so may “controlling influence,”14 and the statute is intended to cover any form or device, which may he “pursuant to an arrangement or understanding with one or more other persons.”15 In clause (iii) Congress has enacted an extensible formula that can be applied to “meet the varied and subtle forms which corporate interrelationships have in the past and will in the future take.”16 It is intended to provide a broad sphere for the Commission’s determinations in order to [642] carry out the policies of the Act as expressed in Section 1.17
The existence of “controlling influence” is a factual determination to be ascertained in the Commission’s expert judgment by the weighing of circumstantial evidence and the drawing of reasonable inferences therefrom.18 The principal factors in determining this from the special circumstances of each case for the statutory exemption are the size and extent of the companies involved, the extent of the intercompany relationships, the ownership and distribution of securities, and the parent company’s part in the organization and development of the subsidiary company together with the past relationships and, because of the public interest and purposes of the Act involved, consideration; must be given to the relationship of charges between the two companies for financing, service and construction contracts, etc.19
In brief recapitulation of the: evidence, we find on one side Bond anji Share’s ownership of 17.51 per cent of petitioner’s voting stock, from which the former derived 47.5 per cent of its total income in 1939; ownership of petitioner’s voting stock widely scattered among approximately 20,000 shareholders so that, other than Bond and Share, no one person or group of persons owns more than four per cent, and the next largest block, 3.3 per cent, is held by Mitchell, life-long official and leading figure, until his retirement, in Bond and Share, and his wife; Bond and Share’s voting of approximately 25 per cent of the total number of shares voted at petitioner’s stockholders meetings, and doing so as late as 1940 by turning its proxies over to petitioner’s proxy committee; intercompany directorships, the chairman of petitioner’s board of directors and executive committee being the chairman of Bond and Share’s board of directors and executive committee; and the long historical relationship between petitioner and Bond and Share in petitioner’s organization, development and management.
On petitioner’s side we find Bond and Share’s relinquishment of its control as petitioner’s fiscal agent; the resignation from Bond and Share affiliations by petitioner’s directors and members of its executive and proxy committees; that neither Bond and Share nor its wholly-owned subsidiary, Ebasco Services, Inc., has ever provided operating services for the American Gas system; that construction and group purchase contracts with the Bond and Share system ended in 1932; that many Bond and Share men have resigned from petitioner’s board until only two with formal connections remain and only one is active; and the evidence of conflict between the management of petitioner and Bond and Share over petitioner’s filing of a formal plan for its integration under Section 11(e) of the Act. >
Without doubt these facts constitute a weakening of the formal evidences of control and, it may be conceded, a contraction in the extent to which it has been exercised in fact. But they cannot bex taken conclusively as a corporate “declaration of independence” or as sufficient to establish such independence as fait accompli. The period of dependence was too long, the separation from influence too inconclusive, to establish as a matter of law that petitioner no longer occupies a state of dependency. The facts do not remove entirely either the existence of “controlling influnce” or the possibility of Bond and Share’s exercising a “latent power” to control, should business conditions make it appropriate. Cf. Detroit Edison Co. v. Securities and Exchange Commission, 6 Cir., 1941, 119 F.2d 730, 739. Under some circumstances “controlling influence may spring as readily from advice constantly sought as from command arbitrarily imposed.” Manchester Gas Co., 1940, 7 S.E.C. 57, 62. It is the Commission’s duty to see that divestment of “controlling influence” is actual and complete, not theoretical or partial. International Paper & Power Co., 1937, 2 S.E.C. 274, 278, rev’d on juris[643] dictional grounds, Lawless v. Securities and Exchange Commission, 1 Cir., 1939, 105 F.2d 574. Controls and influences exercised for so long and so extensively as were Bond and Share’s over petitioner are not severed instantaneously, sharply and completely, especially when powers of voting, consultation and influence such as have been retained remain. Petitioner may have advanced, in the terminology of empire, from status as dependency or colony to one of a dominion, but it has not become an independent empire as a matter of law.
Giving due weight to the past relationships of petitioner and Bond and Share and the other evidences of Bond and Share’s present position of authority and influence in petitioner’s management and stock ownership, we cannot say that the inferences drawn therefrom by the Commission to find “a personnel and tradition” which make petitioner responsive to Bond and Share’s desires are unreasonable.20 The Commission therefore committed no error in denying petitioner exemption from the Act as a subsidiary of Bond and Share.21 That Bond and Share has recently abandoned some characteristics of “controlling influence” did not require the Commission to disregard the past relationships between the two companies.22
The Commission’s finding that the “controlling influence” is such “as to make it necessary or appropriate in the public interest or for the protection of investors or consumers” must likewise be upheld.23 [644] Bond and Share’s relationship to petitioner goes much beyond that of a single investor in petitioner’s securities.24 This relationship has been secured by á disproportionately small investment. Thére is evidence also of large write-ups of petitioner’s properties while admittedly under Bond and Share’s “controlling influence.” ;
But Section 2(a) (8) does not require findings of the evils enumerated in Section 1 of the Act.25 Nor does the statutory formula require findings that the relationship of the parent and subsidiary in the conduct of the subsidiary has affected or will affect the public adversely;26 The statute contemplates that the Commission will exercise its control prospectively in a field of important economic activities.27 In order to do this the Commission has been granted broad powers in this field, and when these have been exercised properly its action must be upheld by the courts.28 We find that the Commission has properly performed its function. The petition to set aside the Commission’s order is therefore denied, and the order of the Commission must be affirmed.
It is so ordered.