Ruling Takes Big Weapon Away From New York AG

In a ruling that could squash a securities fraud suit by the New York attorney general’s office, the state’s Court of Appeals said that the statute of limitations for bringing claims under the Martin Act, a comprehensive state securities law, is three years, not six. That probably terminates the case against Credit Suisse over its marketing of mortgage-backed bonds, and more importantly, shortens the time frame the office has when pursuing securities fraud claims. The Martin Act gives the attorney general broad authority to investigate and prosecute fraudulent securities sale practices. A succession of attorneys general have used it against Wall Street banks for a variety of alleged misdeeds including selling faulty mortgage products during the run-up to the financial crisis. In a dissenting opinion, an associate judge said she believed that the State Legislature had intended for a six-year statute of limitations to apply to the Martin Act. She said that in light of the ruling by her colleagues, the Legislature should make the law explicitly clear on that point. “It now falls to the Legislature to correct this error before significant damage is done to the state’s securities markets,” Judge Rivera wrote.