The New York Martin Act, New York General Business Law Section 352 and 352-C, is a state statute in New York that provides for civil and criminal penalties for securities fraud. The Martin Act is analogous to federal and other state securities fraud statutes, with certain key differences. One of those key differences is that the Martin Act does not require proof of an intent to defraud, or proof of intent to deceive or mislead, in order to charge and convict a person of a crime under the statute, punishable by up to one year in jail. However, if such intent is established, the charges under the Martin Act can be elevated to a felony punishable by state prison time.
This lack of an intent to defraud requirement becomes especially relevant where the Martin Act charges are based on non-disclosure. Generally speaking, it is much more difficult for a prosecutor to prove that a person had the intent to mislead an investor by not providing information that it is to prove that intent based on affirmatively providing false information. Doing away with any requirement that an intent to deceive be alleged or proven removes this hurdle from a prosecutor’s path to conviction. The following touches on this non-disclosure issue.