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 NY
General Business Law Article 23-A
Also
see
NY Executive Law
§ 63(12) Martin
Act predates federal securities laws
 Gives
New York State prosecutors broad powers
- Can subpoena documents
from anyone
doing business in the state
- Can bring civil or criminal charges
- Prosecution needn't prove reliance, damages or
scienter
- Until recently, rarely used against established
enterprises
- Statute doesn't support private rights of action,
although fruits of AG investigation
can bootstrap other civil claims
People
v Royal Securities
165 NYS 2d 945, 5 Misc 2d 907, 949 -950
(N Y Sup 1955)
- "Although the complaint sounds in fraud, many of
the requirements of an ordinary legal action for fraud need not be established
by a plaintiff in an action brought pursuant to the provisions of the Martin
Act. In actions of this type, for example, a plaintiff need not prove
reliance by the purchasers of the securities involved on the fraudulent
representations, nor is it necessary for a plaintiff to prove any element
of damage (People v Electro Process, Inc 284 App Div 833, 132
NYS 2d 531). Likewise, an absence of scienter or intent to defraud will
not relieve a defendant from liability where the purchasing public is
actually being deceived and defrauded (People v Federated Radio 216 App Div 250, 251, 214 NYS 670, 671, affirmed 244 NY 33, 37-38, 154 NE
655, 656). The opinion of the Court of Appeals in this case clearly indicates
that the primary purpose of the Martin Act is 'remedial in its character'
(supra, 244 NY at page 37, 154 NE at page 656). It was designed to prevent
all kinds of fraud in connection with the sales of stocks, bonds and other
commodities and to defeat all unsubstantial and visionary schemes in relation
thereto, whereby the public is fraudulently exploited. The provisions of
this 'blue sky law' must be liberally construed by the court,
therefore, in order that its beneficent purposes may, so far as possible, be
attained and the inexperienced, confiding and credulous investor protected from
his own foolish cupidity (People v Wachtell, 181 Misc 1010, 1011, 47 NYS 2d 945,
946). Thus, the words 'fraud' and 'fraudulent practice' in connection with
defendants' alleged activities must be given a wide meaning so as to encompass
all acts, although not originating in any actual evil design or contrivance to
perpetrate a fraud or injury upon others, do, by their tendency to deceive or
mislead the purchasing public, come within the purpose and intendment of article
23-A of the General Business Law (People v Federated Radio supra, 244
NY at pages 38-39, 154 NE at pages 656-657). (Emphasis added)
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