In Tcherepnin et al. v. Knight et al., the U.S Supreme Court ruled that holders of withdrawable capital shares in a savings and loan association were considered security holders under the Securities Exchange Act of 1934, thus allowing them to sue for securities fraud. The case involved shareholders who had lost money due to alleged fraudulent activities by officers and directors of First Federal Savings & Loan Association of Chicago. They sought damages from these officials but their claims were initially dismissed on grounds that their investments did not qualify as "securities" under federal law, hence they could not claim protection under it. However, upon appeal, the Supreme Court reversed this decision stating that such an interpretation was too narrow and inconsistent with the purpose of legislation which aimed at protecting investors.

In the dissenting opinion for Tcherepnin v. Knight, Justice Harlan argued that the majority had incorrectly interpreted the definition of "security" under federal law. He contended that withdrawal shares in a savings and loan association did not meet this definition because they lacked two essential characteristics: investment in a common enterprise and expectation of profits from others' efforts. Instead, he viewed these shares as more akin to deposit accounts at commercial banks or mutual savings banks, which are typically excluded from securities regulation due to their nature as safe places for storing money rather than investments with associated risks and potential returns. Therefore, he believed that applying securities laws to such instruments would be inappropriate and could potentially disrupt normal banking operations by subjecting them to unnecessary regulatory burdens.