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A04355 Summary:

BILL NOA04355
 
SAME ASSAME AS S01022
 
SPONSORWeprin (MS)
 
COSPNSR
 
MLTSPNSRAbinanti, Bronson, Colton, Jaffee, Lifton, Perry, Rivera
 
Add 631, BC L; ren 179-a to be 179-b, add 179-a, R & SS L
 
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).
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A04355 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A4355
 
SPONSOR: Weprin (MS)
  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 result- ing 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 institu- tional 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: 02/09/17 referred to governmental employees 01/03/18 referred to governmental employees   FISCAL IMPLICATION FOR-STATE AND LOCAL GOVERNMENTS: None.   EFFECTIVE DATE: Immediately
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A04355 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          4355
 
                               2019-2020 Regular Sessions
 
                   IN ASSEMBLY
 
                                    February 4, 2019
                                       ___________
 
        Introduced  by M. of A. WEPRIN -- Multi-Sponsored by -- M. of A. ABINAN-
          TI, BRONSON, COLTON, JAFFEE, LIFTON, PERRY, RIVERA --  read  once  and
          referred to the Committee on Governmental Employees
 
        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:
 
     1    Section 1. The business corporation law is amended  by  adding  a  new
     2  section 631 to read as follows:
     3  § 631. Action by certain mutual funds and other institutional investors.
     4    (a) Any mutual fund or other institutional investor incorporated under
     5  the  laws  of this state or which maintains its principal place of busi-
     6  ness in this state, that is damaged in connection with the  purchase  or
     7  sale  of  a security as a result of the commission of any act prohibited
     8  by section three hundred fifty-two-c of the general  business  law,  may
     9  bring  an  action  for  damages  against any person, partnership, corpo-
    10  ration, company, limited liability company, trust, or  association  that
    11  committed or participated in the commission of such prohibited act.
    12    (b) No mutual fund or other institutional investor that had fewer than
    13  five  hundred  beneficiaries  at the time of the purchase or sale of the
    14  security may bring an action under this section.
    15    (c) With respect to allegations that a representation or statement was
    16  false, the plaintiff with respect to allegations required to  plead  and
    17  prove  that the person who made such statement: (i) knew the truth; (ii)
    18  with reasonable effort could have known the truth; (iii) made no reason-
    19  able effort to ascertain the truth;  or  (iv)  did  not  have  knowledge
    20  concerning the representation or statement made. With respect to allega-
    21  tions  of any other nature, the plaintiff is required to plead and prove
    22  that the person acted with negligence.
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD06775-01-9

        A. 4355                             2
 
     1    (d) No such action may be brought more than six years  from  the  time
     2  the  plaintiff  discovered  the  allegedly prohibited act or could, with
     3  reasonable diligence, have discovered it.
     4    (e)  After such action has been brought, notwithstanding any provision
     5  of law to the contrary, disclosure and related proceedings shall not  be
     6  stayed during the pendency of any motion to dismiss, unless the court so
     7  directs.
     8    §  2.  Section  179-a  of  the  retirement and social security law, as
     9  renumbered by chapter 868 of the laws of  1975,  is  renumbered  section
    10  179-b and a new section 179-a is added to read as follows:
    11    §  179-a.  Action by certain public pension plan or fund or retirement
    12  system investors. 1. A public retirement system as defined  in  subdivi-
    13  sion  twenty-three  of section five hundred one of this chapter, that is
    14  damaged in connection with the purchase or  sale  of  a  security  as  a
    15  result  of the commission of any act prohibited by section three hundred
    16  fifty-two-c of the general business law, may bring an action for damages
    17  against any person, partnership, corporation, company, limited liability
    18  company, trust, or association that committed  or  participated  in  the
    19  commission of such prohibited act.
    20    2.  No  such public pension plan or fund or retirement system investor
    21  that had fewer than five  hundred  beneficiaries  at  the  time  of  the
    22  purchase or sale of the security may bring an action under this section.
    23    3.  With respect to allegations that a representation or statement was
    24  false, the plaintiff is required to plead and prove that the person  who
    25  made  such  statement:  (a)  knew  the truth; (b) with reasonable effort
    26  could have known the truth; (c) made no reasonable effort  to  ascertain
    27  the  truth;  or (d) did not have knowledge concerning the representation
    28  or statement made. With respect to allegations of any other nature,  the
    29  plaintiff  is  required  to  plead  and prove that the person acted with
    30  negligence.
    31    4. No such action may be brought more than six years from the time the
    32  plaintiff discovered the allegedly prohibited act or could, with reason-
    33  able diligence, have discovered it.
    34    5. After such action has been brought, notwithstanding  any  provision
    35  of  law to the contrary, disclosure and related proceedings shall not be
    36  stayed during the pendancy of any motion to dismiss, unless the court so
    37  directs.
    38    § 3. This act shall take effect immediately and shall apply to  causes
    39  of  action  accruing and actions pending before, on, or after its effec-
    40  tive date.
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