The New York State Court of Appeals has ruled that the NYS Attorney General must institute cases under the Martin Act within a three-year statute of limitations period. The court reasoned that the Martin Act, a broad securities fraud statute, expands liability beyond common law fraud and does not permit private rights of action. Consequently, the shorter 3-year statute of limitations applies, rather than the default 6-year period requested by the Attorney General. The case involved Martin Act fraud allegations against the sponsor of residential mortgage-backed securities.
OUR TAKE: This decision follows recent Supreme Court cases limiting statutes of limitations in government enforcement proceedings. The case also materially constrains the use of the (over) broad Martin Act.