S.965 (Libous) / A.6585(Abbate)


Vice President of Government Affairs


S.965 (Libous) / A.6585(Abbate)


Martin Act



The Business Council strongly opposes this legislation that would:

  • Mandate that the Attorney General investigate alleged Martin Act violations brought forth by the trustees of public retirement systems where the systems are claiming damage.
  • Direct the Attorney General to commence action when appropriate after such investigations, and pursue restitution to these public retirement systems.
  • Require proceeds of any final judgment or settlement which provides for restitution of money or property to be remitted to affected public retirement systems.
  • The bill would also retroactively apply these new provisions to alleged acts and omissions occurring on or after January 1, 2003.

In general, we oppose any expansion of the Martin Act. This is one of the strongest – and we believe, unfair - securities laws in the nation, because of its overly broad definition of fraud, low evidentiary standards and expansive investigative authority. Among other things, its definition of fraud is broader than that in common law, federal securities law, or other similar state law, in that it does not require a finding of intent to defraud, just the misrepresentation or omission of a material fact. It also does not require demonstration that an injured party in any way relied on such misstatement or omission in a financial transaction.

Importantly, the Martin Act can be used against any publicly traded company whose securities transactions involve New Yorkers.

For these reasons, expansion of the Martin Act would send a significant adverse message to private sector employers located in, and involved in security trades in, New York State.

Moreover, we have serious concerns with the specific provisions of this bill.

  • We question its need, since the Martin Act already allows the Attorney General to seek restitution as part of Martin Act enforcement actions, and the Court of Appeals has confirmed that the Martin Act in no way impairs the ability of any party to bring common law fraud cases.
  • In addition, earlier this year, as part of pension reform legislation, new language was adopted requiring that money received by the Attorney General in connection with a Martin Act settlement related to a retirement fund must be deposited into such funds (see §78-a, Chapter 18, Laws of 2012).
  • This bill also gives non-elected pension fund trustees the authority to mandate the Attorney General to devote its investigative resources to their allegations.
  • It reaches back in time nine years to retroactively apply new statutory provisions to alleged violations of the Martin Act.
  • By requiring pension funds to finance these investigations and litigation by the Attorney General, it could provide undue influence to the pension funds in the prosecution and/or settlement of cases.

The Business Council has longstanding concerns with the excessively broad criteria for security violations under the Martin Act, and believes at most its provisions need to be reserved to the discretion of elected state officials.

We strongly oppose this new authority granted to pension funds to direct state investigatory activity, and to retroactively impose these new provisions.

Further, the Attorney General has ample authority to investigate and prosecute security law violations, and existing law already provides the restitution of recovered funds to any pension funds that may have been damaged by such violations.

For these reasons, we strongly oppose approval of this inappropriate, unnecessary legislation.