In addition, what distinguishes the Martin Act from other securities laws across the United States is its unusually broad scope. To prove a violation under the Act, New York state is not required to prove a given action was intentional; it must simply prove that a company has misrepresented or omitted a material fact or engaged in other conduct which deceives or misleads the public, or even tends to deceive or mislead the public.
Additionally, under the Martin Act, the NY AG can investigate, issue subpoenas and demand corporations produce documents without probable cause or the ruling of a grand jury. The state is not required to provide proof of scienter (intent or knowledge of wrongdoing), damages to the public, or reasonable reliance (what a prudent person would believe and act upon if told something by another).
CRITICISM OF THE MARTIN ACT
Troublingly, the Martin Act also allows the NY AG to subpoena witnesses to appear for an interview, or to provide written statements or documents, without going before a grand jury. Because these subpoenas are purely “investigatory,” witnesses subpoenaed by the attorney general cannot claim a right to counsel or the right against self-incrimination.
Legal experts have vocalized concerns that the Martin Act is an overreach of the state’s authority. Without needing to prove malicious intent, the NY AG has the ability to prosecute a company through an almost limitless scope, threatening the balance between state and federal authority.
