BILL NUMBER: S6536

SPONSOR: GIANARIS
 
TITLE OF BILL:  An act to amend the civil practice law and rules, in
relation to the statute of limitations for certain crimes related to
fraudulent practices in respect to stocks, bonds and other securities

 
JUSTIFICATION:

For decades, courts in New York followed the precedent that claims
brought under the Martin Act and under Section 63(12) of the State's
Executive Law had six-year statutes of limitation. The Martin Act is one
of the state's most powerful tools to prosecute financial fraud, and
Section 63(12) is the cornerstone of the state's consumer protection
laws. This six-year timeline was essential to some of the most meaning-
ful cases that have reined in Wall Street excesses, halted fraudulent
practices, and returned millions of dollars to defrauded consumers and
investors. A recent Court of Appeals decision overturned this precedent,
finding that the statute of limitations should be reduced to three years
instead of six for Martin Act violations and fraud under the Executive
Law other than common law fraud. This turned on its head literally
decades of case law. The Court of Appeals ruling jeopardizes the state's
              

ability, through the Office of Attorney General ("OAG"), to protect
investors and consumers, prevent bad practices, and hold companies
accountable for fraud and illegal conduct. It also impairs the OAG's
ability to recover relief for consumers harmed by such conduct.

As it currently stands, a three year statute of limitations is signif-
icantly shorter than that of many comparable state statutes of limita-
tion. Many states have no statute of limitations for attorney general
actions involving consumer frauds, while others have a six-year or long-
er statutes of limitations. Other enforcement agencies also have longer
statute of limitations periods. For example, the Securities and Exchange
Commission has no statute of limitations for equitable remedies and a
five-year statute of limitations for civil penalties. A six-year statute
of limitations would ensure that OAG is able to operate on equal footing
with other agencies, which is of paramount importance given the reduced
enforcement activity that has taken place during the Trump Adminis-
tration. Correcting this is critical to maintaining OAG's status as a
preeminent enforcer of consumer protection and securities law in New
York State.

Important cases involving financial fraud or other fraudulent or illegal
conduct often take time to develop and involve extensive investigations
often in novel areas of business practices. Electronic discovery, which
often requires significant time to collect, review, and produce, is
often a major source of delay. In some cases, targets of fraud place
roadblocks in the path of the OAG's collection of key evidence, necessi-
tating motions to compel compliance, which can further delay the filing
of a lawsuit. Returning to a six-year statute of limitations would allow
OAG a reasonable amount of time to investigate cases of fraud.

Clarifying that the statute of limitations for claims under the Martin
Act and Executive Law is six years will allow New York State to better
protect investors and consumers, obtain more relief for consumers, and
bring its authority in line with other states and enforcement agencies.
This timeline is critical to the work of the OAG and has previously
allowed it to pursue justice including in the office's landmark cases on
residential mortgage backed securities following the 2008 financial
crisis. These settlements resulted in over a billion dollars for the
state and included millions of dollars in consumer relief and cash for
legal services and housing counseling for victims of Hurricane Sandy.
This legislation will facilitate OAG to continue to work on financial
and other fraud cases with substantial impact and achieve better results
for New York State and its residents.

 
LEGISLATIVE HISTORY:

 
FISCAL IMPLICATIONS:

 
EFFECTIVE DATE:
This act shall take effect immediately.