United States v. Naftalin

The question presented in this case is whether § 17 (a)(1) of the Securities Act of 1933, 48 Stat. 84, as amended, 68 Stat. 686, 15 U. S. C. § 77q (a)(1), prohibits frauds against brokers as well as investors. We hold that it does.

Respondent, Neil Naftalin, was the president of a registered broker-dealer firm and a professional investor. Between July and August 1969, Naftalin engaged in a “short selling” scheme. He selected stocks that, in his judgment, had peaked in price and were entering into a period of market decline. He then placed with five brokers orders to sell shares of these…