Legislation is pending in the New York State Legislature which would establish a private right of action for certain institutional investors to enforce the Martin Act, the state's securities law.
The Martin Act provides broad enforcement authority to the New York State Attorney General but, according to the New York Court of Appeals, preempts civil action by private investors. However that premise has recently been challenged and if New York's highest court rules against preemption it could spark a number of claims from private investors in the New York State courts.
One major benefit for these investors is that unlike the terms for claims brought under the Federal court, under the New York state courts investors would be able to secure broader terms of statute of limitation.
Causes of action under New York's Martin Act have a statute of limitations of six years. The statute of limitations would start running upon discovery or ability to discover the fraud with reasonable diligence. Disclosure and related proceedings would move forward during pendency of a motion to dismiss claims, according to a note published by Sidley Austin LLP.
Institutional investors would also maintain the right to sue for damages under Federal securities laws and New York common law.