In the United States v. Naftalin case of 1978, the Supreme Court ruled that Section 17(a) of the Securities Act of 1933 applies to fraudulent activities even if they do not involve a direct sale or offer to sell securities. The defendant, Mr. Naftalin, had been convicted for fraudulently misrepresenting himself as an agent for different customers in order to purchase more shares than he was entitled to during a new issue distribution. He then sold these excess shares at a profit on his own account without ever delivering them directly to any customer. His conviction was initially overturned by an appellate court which held that Section 17(a) only applied when there is deceit related directly with selling or offering securities and did not cover this type of "fraudulent scheme". However, the Supreme Court disagreed with this interpretation and reinstated Mr.Naftalin's conviction stating that Congress intended broad coverage under section 17(a), including deceptive practices like those employed by Naftalin.

In the dissenting opinion for United States v. Naftalin, Justice Rehnquist argued that the majority misinterpreted Section 17(a) of the Securities Act of 1933. He contended that this section was not intended to apply to fraudulent activities involving securities transactions unless they were directly related to a public offering. According to him, applying Section 17(a) broadly would render other specific provisions in federal securities laws redundant and unnecessary. Furthermore, he pointed out that Congress had already established a comprehensive regulatory scheme under different sections which specifically addressed fraud in securities trading on national exchanges or by mail or wire communication across state lines. Therefore, he believed it was inappropriate and unnecessary for the court to extend Section 17(a)'s reach beyond its original intent.