Last week, Governor Cuomo signed into law a bill to amend the New York Civil Practice Law and Rules (“CPLR”) to extend the statute of limitations to six years for financial fraud claims brought under the Martin Act. One of the strongest blue sky laws in the country, New York’s Martin Act gives wide latitude to the state’s Attorney General to investigate and prosecute financial fraud, both criminally and civilly. The statute is a particularly useful weapon in the state’s arsenal, as it does not require the Attorney General to prove scienter, or fraudulent intent, in order to prevail.
This legislation effectively overturns a 2018 decision of the Court of Appeals in the state’s prosecution of Credit Suisse affiliates for fraud related to Credit Suisse’s sale of residential mortgage backed securities. The Court was called on to determine the appropriate statute of limitations for Martin Act claims, an issue that had not been addressed since the law’s enactment in 1921. Because the scope of the Martin Act exceeds the scope of common law fraud, the Court ruled that the CPLR’s three-year statute of limitations applicable to statutory causes of action, rather than its six-year statute of limitations applicable to common law fraud, should apply. Accordingly, the state’s claims against Credit Suisse were dismissed as time-barred.
The legislation also extended to six years the statute of limitations for claims brought under Executive Law § 63(12), a law allowing for prosecution of repeated or persistent fraud also at issue in the Credit Suisse case.