In the case of Securities and Exchange Commission v. Drexel & Co., 1954, the U.S. Supreme Court addressed whether or not a brokerage firm could be held liable for aiding and abetting in securities fraud by their clients without having actual knowledge of the fraudulent activity. The SEC had charged Drexel & Co., a prominent investment bank, with violating federal securities laws by facilitating illegal stock sales for one of its customers who was engaged in market manipulation schemes. However, Drexel claimed that they were unaware of their client's illicit activities. The court ruled in favor of Drexel & Co., stating that mere negligence on part of the broker does not constitute "aiding and abetting" under federal law unless there is proof showing conscious involvement or reckless disregard to obvious risks involved. This ruling set an important precedent regarding liability standards for brokers and other intermediaries in financial transactions.

In the dissenting opinion for SECURITIES AND EXCHANGE COMMISSION v. DREXEL & CO., Justice Robert H. Jackson argued that the majority's decision to uphold a Securities and Exchange Commission (SEC) order against Drexel & Co. was an overreach of administrative power, which could potentially lead to arbitrary enforcement of securities laws. He contended that the SEC had exceeded its authority by interpreting "dealer" in a way not intended by Congress when it enacted the Securities Exchange Act of 1934, thereby subjecting firms like Drexel who were primarily engaged in underwriting activities rather than dealing operations to unnecessary regulation and oversight. Furthermore, he expressed concern about potential harm caused by such broad interpretation on investment banking industry as well as capital markets overall due to increased regulatory burden and uncertainty.