What's happening
This bill allows large institutional investors and public pension funds in New York to sue for damages from securities fraud.
Why it matters
Empowers large institutional investors and public pension funds to directly seek compensation for securities fraud. , which could increase accountability for companies and individuals that commit financial misdeeds affecting these organizations’ investments.
Limits the right to sue to funds with at least 500 beneficiaries. , ensuring that only large-scale investors—those likely representing significant public or retirement interests—can bring these actions, rather than small funds or individuals.
Sets a clear legal standard for proving fraud. , requiring plaintiffs to show not just that a statement was false, but that the defendant knew, should have known, or was negligent regarding the truth—potentially making it somewhat easier for large investors to pursue claims compared to federal standards.
Removes automatic delays in legal discovery when defendants file motions to dismiss. , which can speed up the litigation process and prevent companies from using procedural tactics to stall or block fraud investigations, potentially leading to faster resolution and recovery of losses for public funds.
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Who cares
Headline styles
Let Pension Funds Sue Fraudsters
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to corporations, authorities and commissions
- Referred to corporations, authorities and commissions
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Let Pension Funds Sue Fraud
In Assembly Committee · Governmental Employees · Sponsor David Weprin
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
1022
2019-2020 Regular Sessions
IN SENATE
January 10, 2019
Introduced by Sen. RIVERA -- read twice and ordered printed, and when printed to be committed to the Committee on Corporations, Authorities and Commissions
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 Assembly, do enact as follows:
Section 1. The business corporation law is amended by adding a new section 631 to read as follows: § 631. Action by certain mutual funds and other institutional investors.
(a) Any mutual fund or other institutional investor incorporated under the laws of this state or which maintains its principal place of business in this state, that is damaged in connection with the purchase or sale of a security as a result of the commission of any act prohibited by section three hundred fifty-two-c of the general business law, may bring an action for damages against any person, partnership, corporation, company, limited liability company, trust, or association that committed or participated in the commission of such prohibited act.
(b) No mutual fund or other institutional investor that had fewer than five hundred beneficiaries at the time of the purchase or sale of the security may bring an action under this section.
(c) With respect to allegations that a representation or statement was false, the plaintiff with respect to allegations required to plead and prove that the person who made such statement: (i) knew the truth; (ii) with reasonable effort could have known the truth; (iii) made no reasonable effort to ascertain the truth; or (iv) did not have knowledge concerning the representation or statement made. With respect to allegations of any other nature, the plaintiff is required to plead and prove 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
S. 1022 2
(d) No such action may be brought more than six years from the time the plaintiff discovered the allegedly prohibited act or could, with reasonable diligence, have discovered it.
(e) After such action has been brought, notwithstanding any provision of law to the contrary, disclosure and related proceedings shall not be stayed during the pendency of any motion to dismiss, unless the court so directs.
§ 2. Section 179-a of the retirement and social security law, as renumbered by chapter 868 of the laws of 1975, is renumbered section 179-b and a new section 179-a is added to read as follows:
§ 179-a. Action by certain public pension plan or fund or retirement system investors. 1. A public retirement system as defined in subdivision twenty-three of section five hundred one of this chapter, that is damaged in connection with the purchase or sale of a security as a result of the commission of any act prohibited by section three hundred fifty-two-c of the general business law, may bring an action for damages against any person, partnership, corporation, company, limited liability company, trust, or association that committed or participated in the commission of such prohibited act.
2. No such public pension plan or fund or retirement system investor that had fewer than five hundred beneficiaries at the time of the purchase or sale of the security may bring an action under this section.
3. With respect to allegations that a representation or statement was false, the plaintiff is required to plead and prove that the person who made such statement: (a) knew the truth; (b) with reasonable effort could have known the truth; (c) made no reasonable effort to ascertain the truth; or (d) did not have knowledge concerning the representation or statement made. With respect to allegations of any other nature, the plaintiff is required to plead and prove that the person acted with negligence.
4. No such action may be brought more than six years from the time the plaintiff discovered the allegedly prohibited act or could, with reasonable diligence, have discovered it.
5. After such action has been brought, notwithstanding any provision of law to the contrary, disclosure and related proceedings shall not be stayed during the pendancy of any motion to dismiss, unless the court so directs.
§ 3. This act shall take effect immediately and shall apply to causes of action accruing and actions pending before, on, or after its effective date.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
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
2011-2012: S2677
2013-2014: S943
2015-2016: S1475
Fiscal implication for state and local governments
None.
Effective date
Immediately.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.