Bill S2677-2011

Authorizes a public retirement system, mutual fund, or other institutional investor to bring actions for damages sustained due to violations of the Martin Act

Authorizes a public retirement system, as defined in section 501 of the retirement and social security law, mutual fund, or other institutional investor to bring actions for damages sustained due to the commission of certain prohibited and criminal acts in violation of the Martin Act (Fraudulent Practice in Respect to Stocks, Bonds and other Securities).

Details

Actions

  • Mar 12, 2012: COMMITTEE DISCHARGED AND COMMITTED TO RULES
  • Mar 9, 2012: NOTICE OF COMMITTEE CONSIDERATION - REQUESTED
  • Jan 4, 2012: REFERRED TO CORPORATIONS, AUTHORITIES AND COMMISSIONS
  • Jan 28, 2011: REFERRED TO CORPORATIONS, AUTHORITIES AND COMMISSIONS

Memo

BILL NUMBER:S2677

TITLE OF BILL: An act to amend the business corporation law and the retirement and social security law, in relation to authorizing certain actions by institutional investors

PURPOSE OR GENERAL IDEA: This bill would provide authority to large institutional investors, including the state's pension fund to bring actions for damages resulting from violations of the State's securities laws.

SUMMARY OF SPECIFIC PROVISIONS: Amends the BCL and R&SS Law to allow mutual funds and institutional investors, and the state retirement fund to bring an action for damages as a result of violating state securities laws.

JUSTIFICATION: As a result of recent corporate wrongdoings, trustees of large institutional investors such as mutual funds or the State's pension fund, have found themselves without remedy for damages and massive losses due to corporate violations of state securities laws. Under current law, the State attorney general has broad powers to prevent fraudulent securities practices, yet large institutional investors have no right of action when the state's securities laws are violated, because New York is only one or two states without such remedy. This bill only furthers the purposes of the Martin Act which are to deter fraudulent practices in the sale of securities and protect investors thereof.

Investors, under current federal law, may make damage claims in federal court under the Private Securities Litigation Reform Act, but no such avenue exists for state securities laws. By bringing action in State court, large institutional investors can have an appropriate avenue to bring damage claims against corporations established themselves by state law. The amended version of this bill incorporates the recommendations of the Comptroller of the State of New York, the sole trustee of the State's pension fund, who fully supports the legislation.

PRIOR LEGISLATIVE HISTORY: Referred to Senate Rules Committee (2008) A.8949-A (2003-04), A.2102 (2005-06; Passed Assembly). A.1369 (2007-0008; Passed Assembly in 2007). 2009-10: Schneiderman S.5768

FISCAL IMPLICATION FOR STATE AND LOCAL GOVERNMENTS: None.

EFFECTIVE DATE:

Immediately.


Text

STATE OF NEW YORK ________________________________________________________________________ 2677 2011-2012 Regular Sessions IN SENATE January 28, 2011 ___________
Introduced by Sen. RIVERA -- read twice and ordered printed, and when printed to be committed to the Committee on Corporations, Authorities and Commissions AN ACT to amend the business corporation law and the retirement and social security law, in relation to authorizing certain actions by institutional investors THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The business corporation law is amended by adding a new section 631 to read as follows: S 631. ACTION BY CERTAIN MUTUAL FUNDS AND OTHER INSTITUTIONAL INVESTORS. (A) ANY MUTUAL FUND OR OTHER INSTITUTIONAL INVESTOR INCORPORATED UNDER THE LAWS OF THIS STATE OR WHICH MAINTAINS ITS PRINCIPAL PLACE OF BUSI- NESS IN THIS STATE, THAT IS DAMAGED IN CONNECTION WITH THE PURCHASE OR SALE OF A SECURITY AS A RESULT OF THE COMMISSION OF ANY ACT PROHIBITED BY SECTION THREE HUNDRED FIFTY-TWO-C OF THE GENERAL BUSINESS LAW, MAY BRING AN ACTION FOR DAMAGES AGAINST ANY PERSON, PARTNERSHIP, CORPO- RATION, COMPANY, LIMITED LIABILITY COMPANY, TRUST, OR ASSOCIATION THAT COMMITTED OR PARTICIPATED IN THE COMMISSION OF SUCH PROHIBITED ACT. (B) NO MUTUAL FUND OR OTHER INSTITUTIONAL INVESTOR THAT HAD FEWER THAN FIVE HUNDRED BENEFICIARIES AT THE TIME OF THE PURCHASE OR SALE OF THE SECURITY MAY BRING AN ACTION UNDER THIS SECTION. (C) WITH RESPECT TO ALLEGATIONS THAT A REPRESENTATION OR STATEMENT WAS FALSE, THE PLAINTIFF WITH RESPECT TO ALLEGATIONS REQUIRED TO PLEAD AND PROVE THAT THE PERSON WHO MADE SUCH STATEMENT: (I) KNEW THE TRUTH; (II) WITH REASONABLE EFFORT COULD HAVE KNOWN THE TRUTH; (III) MADE NO REASON- ABLE EFFORT TO ASCERTAIN THE TRUTH; OR (IV) DID NOT HAVE KNOWLEDGE CONCERNING THE REPRESENTATION OR STATEMENT MADE. WITH RESPECT TO ALLEGA- TIONS OF ANY OTHER NATURE, THE PLAINTIFF IS REQUIRED TO PLEAD AND PROVE THAT THE PERSON ACTED WITH NEGLIGENCE.
(D) NO SUCH ACTION MAY BE BROUGHT MORE THAN SIX YEARS FROM THE TIME THE PLAINTIFF DISCOVERED THE ALLEGEDLY PROHIBITED ACT OR COULD, WITH REASONABLE DILIGENCE, HAVE DISCOVERED IT. (E) AFTER SUCH ACTION HAS BEEN BROUGHT, NOTWITHSTANDING ANY PROVISION OF LAW TO THE CONTRARY, DISCLOSURE AND RELATED PROCEEDINGS SHALL NOT BE STAYED DURING THE PENDENCY OF ANY MOTION TO DISMISS, UNLESS THE COURT SO DIRECTS. S 2. Section 179-a of the retirement and social security law, as renumbered by chapter 868 of the laws of 1975, is renumbered section 179-b and a new section 179-a is added to read as follows: S 179-A. ACTION BY CERTAIN PUBLIC PENSION PLAN OR FUND OR RETIREMENT SYSTEM INVESTORS. 1. A PUBLIC RETIREMENT SYSTEM AS DEFINED IN SUBDIVI- SION TWENTY-THREE OF SECTION FIVE HUNDRED ONE OF THIS CHAPTER, THAT IS DAMAGED IN CONNECTION WITH THE PURCHASE OR SALE OF A SECURITY AS A RESULT OF THE COMMISSION OF ANY ACT PROHIBITED BY SECTION THREE HUNDRED FIFTY-TWO-C OF THE GENERAL BUSINESS LAW, MAY BRING AN ACTION FOR DAMAGES AGAINST ANY PERSON, PARTNERSHIP, CORPORATION, COMPANY, LIMITED LIABILITY COMPANY, TRUST, OR ASSOCIATION THAT COMMITTED OR PARTICIPATED IN THE COMMISSION OF SUCH PROHIBITED ACT. 2. NO SUCH PUBLIC PENSION PLAN OR FUND OR RETIREMENT SYSTEM INVESTOR THAT HAD FEWER THAN FIVE HUNDRED BENEFICIARIES AT THE TIME OF THE PURCHASE OR SALE OF THE SECURITY MAY BRING AN ACTION UNDER THIS SECTION. 3. WITH RESPECT TO ALLEGATIONS THAT A REPRESENTATION OR STATEMENT WAS FALSE, THE PLAINTIFF IS REQUIRED TO PLEAD AND PROVE THAT THE PERSON WHO MADE SUCH STATEMENT: (A) KNEW THE TRUTH; (B) WITH REASONABLE EFFORT COULD HAVE KNOWN THE TRUTH; (C) MADE NO REASONABLE EFFORT TO ASCERTAIN THE TRUTH; OR (D) DID NOT HAVE KNOWLEDGE CONCERNING THE REPRESENTATION OR STATEMENT MADE. WITH RESPECT TO ALLEGATIONS OF ANY OTHER NATURE, THE PLAINTIFF IS REQUIRED TO PLEAD AND PROVE THAT THE PERSON ACTED WITH NEGLIGENCE. 4. NO SUCH ACTION MAY BE BROUGHT MORE THAN SIX YEARS FROM THE TIME THE PLAINTIFF DISCOVERED THE ALLEGEDLY PROHIBITED ACT OR COULD, WITH REASON- ABLE DILIGENCE, HAVE DISCOVERED IT. 5. AFTER SUCH ACTION HAS BEEN BROUGHT, NOTWITHSTANDING ANY PROVISION OF LAW TO THE CONTRARY, DISCLOSURE AND RELATED PROCEEDINGS SHALL NOT BE STAYED DURING THE PENDANCY OF ANY MOTION TO DISMISS, UNLESS THE COURT SO DIRECTS. S 3. This act shall take effect immediately and shall apply to causes of action accruing and actions pending before, on, or after its effec- tive date.

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