In the 1979 case Aaron v. Securities and Exchange Commission, the Supreme Court ruled that in order to establish a violation of Section 17(a) of the Securities Act or Section 10(b) of the Exchange Act, it is necessary to prove that an individual acted with scienter - intent or knowledge of wrongdoing. The court held that these provisions require proof not only that a defendant made false statements but also did so knowingly or recklessly disregarding their truthfulness. This ruling came after Charles Aaron was found guilty by lower courts for fraudulent activities related to securities transactions without proving his intentionality behind such actions. The Supreme Court's decision clarified legal standards for fraud cases under federal securities laws and emphasized on culpability as a key element in determining violations.

In the dissenting opinion for Aaron v. Securities and Exchange Commission, Justice Rehnquist disagreed with the majority's interpretation of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act. He argued that these sections should not be read to require proof of scienter - a mental state embracing intent to deceive, manipulate or defraud - in civil enforcement actions brought by SEC. Instead, he believed that negligence would suffice as a standard for liability under these provisions. The justice contended that this approach was more consistent with Congress' aim when it enacted securities laws: protecting investors from misleading practices without necessarily requiring proof that defendants acted intentionally or recklessly. Furthermore, he pointed out potential practical difficulties in applying a uniform scienter requirement across different types of securities violations.