The Business Council of New York State strongly opposes (S.5768/A.8646) because it would significantly increase the legal exposure of the business community by authorizing a public retirement system, mutual fund, or other institutional investor to bring actions for damages sustained due to violations of the Martin Act.
Enacted in 1921 and amended in 1955, The Martin Act is one of the toughest securities laws in the nation because it has an overly broad definition of fraud, lower evidentiary standards and it does not require prosecutors to prove intent. The Attorney General has exclusive authority to seek damages pursuant to the Martin Act.
In recent years, the broad power of the Martin Act was revived and energetically enforced by former Attorney General Eliot Spitzer. While Mr. Spitzer is credited with recovering billions in settlements for fraudulent activity he is also accused by some of misusing the unlimited powers of the Martin Act.
Under this bill, the voracious plaintiff's bar would be empowered to avail themselves with the extraordinary powers of the Martin Act. The enactment of this bill would allow the plaintiff's bar to initiate a cascade of lawsuits that would irreparably harm New York State's struggling economy resulting in an exodus of corporate operations, significant job losses and a further decline of New York's tax base.
The proposed legislation is contrary to a report commissioned by United States Senator Charles Schumer and New York City Mayor Michael Bloomberg titled Sustaining New York's and the US' Global Financial Services Leadership. The findings of the report conclude that the most pressing issues affecting New York's leadership as a global financial hub, including regulation, enforcement, and litigation are national issues that affect other US financial centers as well.
The Business Council believes that this legislation is unnecessary because state and federal law provides investors ample protections. As previously stated, the Attorney General has exclusive authority to seek damages pursuant to the Martin Act. Federal securities laws provide the powerful Securities and Exchange Commission the ability to seek damages for institutional investors. Furthermore, extending the unlimited power of the Martin Act to the plaintiff's bar would significantly increase the legal exposure of businesses and the frictional costs associated with the cascade of lawsuits.
The Business Council strongly opposes this legislation because it would cause irreparable harm the New York State economy.