Corporate Governance

Manhattan D.A. Signals Increased Martin Act Enforcement

By Anthony F. Maul

In a speech to the New York City Bar Association, Manhattan D.A. Cyrus R. Vance last week called for tougher enforcement of a New York state law that broadly prohibits deceitful conduct in connection with the offer, sale or purchase of securities.  D.A. Vance said that he would press the legislature to impose mandatory incarceration for violators and create sentences that increase in severity along with the crime.  He also indicated that he intends to take fuller advantage of the law to prosecute a wide array of frauds and Ponzi schemes, including schemes involving investment funds. 

The Martin Act was the subject of news last summer when Judge Marrero of the Southern District of New York overturned a large body of case law that had held the Act preempted private tort causes of action arising from the offer, sale or purchase of securities.  Prior to that ruling, some courts had held that the Martin Act, which provides no private right of action, precluded investors? claims sounding in negligence or breach of fiduciary duties.  Increased criminal investigation and enforcement of violations of the Act is likely to uncover previously unknown frauds.  And with the specter of preemption no longer in the offing, violators may face exposure to both investor suits and criminal sanction.

Full post as published by PomTalk on February 01, 2011 (boomark / email).