The majority of my argument will center on one TNG episode in particular, TNG's season 3 episode, "The Most Toys." Quotes follow, they're all from TMT unless otherwise specified.
They clearly have to buy something from Fajo. He's selling. He's a businessman. His vessel would certainly fall under the category of "capital."PICARD (V.O.)
Captain's log, Stardate 43872.2. In order to neutralize a sudden contamination of the water supply at the Federation colony on Beta Agni Two, we are procuring one hundred and eight kilos of hytritium from the Zibalian trader, Kivas Fajo.
If Fajo were selling illegally, would he so cavalierly reveal his source, and risk the Federation "communist" authorities mining it all and selling it, eating his profits, and destroying his business and livelihood? Not unless he's an idiot.PICARD (to Fajo) I realize we have acquired your complete supply of hytritium. Do you know where we could obtain more?
FAJO: That may be difficult. The only source I know is in the Sigma Erani System.
This is where we see what Fajo is capable of. More to the point of the argument, that one sentence, "The Varon-T disruptor is banned in the Federation." establishes two things: Kivas Fajo is a Federation citizen, yet he conducts business. Secondly, it establishes that not all disruptors are banned in the Federation. It is doubtful the Federation Council specifically banned the Varon-T if only five were made, but it is more likely banned as part of a larger class of torture weapons that are banned. This refutes the claim of Federation citizens not being allowed to possess weapons.DATA I do not intend to sit in the chair.
FAJO You will. You don't believe it yet. But you will.
He goes to a wall safe with a combination lock... and opens it... takes out a nasty looking hand weapon which we will call a disruptor.
FAJO Have you ever seen one of these, Data?
DATA I do not recognize it.
FAJO I'm not surprised. This is the prototype of the Varon-T disruptor.
DATA (reacts) The Varon-T disruptor is banned in the Federation.
FAJO Yes. Only five were ever manufactured. I own four. I sleep with one under my pillow. I sleep very well knowing it's there.
DATA It is a most lethal weapon.
FAJO Oh, it's much more than lethal, Data. It's vicious. It tears a body from the inside out, quite slowly by phaser standards, a tortuous, painful death. (beat, pointed) I've always wanted to try it.
No mention of charges for conducting business in the Federation or earning a profit. As for the charges of possessing illegal disruptors, he probably stole them.DATA Yes, Commander. Please arrange to take Kivas Fajo into custody for murder, kidnapping, theft...
Apparently Fajo's ship hasn't been confiscated, and it's his most valuable possession of all.FAJO Do not count me out so quickly. I had you once. I may have you back in my collection again.
DATA
Unlikely. Your collection has been confiscated pending your trial. All of your stolen possessions are being returned to their rightful owners.
(MORE)
STAR TREK: "The Most Toys" - REV. 2/26/90 - ACT FIVE 56-57.
74 CONTINUED:
DATA (Cont'd) You have lost everything you value.
While irrelevant to the main point of the argument, it seems Fajo expects to be out in a few years despite a murder and kidnapping charge over his head and numerous theft charges. He expects Data to become part of his collection again.
Another reference to a civilian owning a weapon, in TNG4: The Wounded:
moved to Parting Shots due to the banning it contains. ~fgO'BRIEN Cardassians were advancing on us, moving through the streets, destroying, killing... I was with a group of women and children when two Cardassian soldiers burst in... I stunned the one, but the other jumped me... we struggled... one of the women threw me a phaser and I fired...
O'Brien takes a sip of beer.
O'BRIEN The phaser was set at maximum. The man just... incinerated... there, before my eyes.