The Martin Act was established in Albany in 1921, it granted the Attorney General broad powers to investigate and pursue alleged wrongdoing associated with the purchase and sale of securities. The Martin Act is one of the toughest securities laws in the nation as these powers of the AG are so extraordinary that this act does not require any elements of proof. We have recently seen this power being executed by the past two Attorney Generals and currently being used by Eric Schneiderman in a vast attempt to rid securities companies of fraud.
A recent NY Post Article states: ” Business leaders are fuming over Attorney General Eric Schneiderman’s nervy use of the Martin Act, the state law that gives him super-broad powers to investigate and press charges against alleged financial fraud. For example, Schneiderman has gone after several large energy firms for allegedly over-optimistic financial comments on upstate gas “fracking,” a charge conveniently aligned with his own anti-fracking stance. Recently he used the act in an attempt to upset a settlement deal between bankers and the feds over mortgage misdeeds — critics charge him with “blindsiding” the Bank of New York Mellon with what BNYM calls “outrageous” and “baseless” fraud charges.”
Currently, only the Attorney General benefits from such a permissive standard of proof in securities fraud. However there is a bill circulating which would pass these powers along to private attorneys. This action would be devastating for New York’s economy, causing a rush of lawsuits being filed against large companies by attorneys looking for a pay day.
LRANY fought against this legislation last session and was able to persuade multiple co-sponsors to remove themselves from the bill.
We will continue this fight in the upcoming 2012 session!