Pedestrians pass the New York Stock Exchange on Wall Street on Friday. Photo: Frank Franklin II/AP

Legislation to reinstate a six-year statute of limitations for the Martin Act, which gives the New York Attorney General's Office authority to prosecute and pursue civil claims of securities fraud against Wall Street's financial firms, was signed by Gov. Andrew Cuomo Monday.

The new law reverses a decision last year from the New York Court of Appeals, the state's highest court, which interpreted the law to have a three-year statute of limitations. While those cases are typically considered a priority for the office, last year's decision placed a first-time limit on how they're pursued.

Enter New York Attorney General Letitia James, who referred a bill to state lawmakers earlier this year to reinstate the six-year statute of limitations. That's called a program bill, which is when a statewide official proposes a change in law to the Legislature.

"If Main Street has to play by a set of rules, then so must Wall Street," James said. "This law strengthens two of our most critical tools in holding corporate greed accountable and delivering justice for victims of financial fraud."

Despite the complexity of the securities fraud litigation brought under the Martin Act, the measure is relatively straightforward.

The law adds a new subdivision to a section of the state's civil practice law that allows actions brought under the Martin Act to be pursued within six years of an alleged violation. The change also applies to Executive Law 63(12), a part of the state's law that allows the Attorney General's Office to seek restitution or damages in cases of persistent fraud.

The bill was carried in the Legislature by Assemblyman Rober Carroll, D-Brooklyn, and state Sen. Michael Gianaris, D-Queens. Both lawmakers worked with James to move the bill before this year's legislative session ended in June.

"The Martin Act has become an invaluable tool for enforcement against financial crimes and unfortunately a misguided court decision made it harder to use that tool," Gianaris said. "We wanted to go back to the way it was originally used and allow the state the maximum time possible to go after wrongdoing in the financial services industry."

The Martin Act, which was first approved by the Legislature nearly a century ago, was sparsely used to pursue financial crimes on Wall Street until two decades ago, when Eliot Spitzer took office as state attorney general under former Gov. George Pataki. Spitzer would later go on to become the state's governor.

Spitzer was the first state attorney general in decades to use the law generously, so much so that he was dubbed the "Sheriff of Wall Street." His immediate successors—Gov. Andrew Cuomo and former Attorney General Eric Schneiderman—also made use of the law.

James, who took office this year, has said she plans to use the Martin Act wherever her office sees fit, but that she doesn't plan to focus her tenure exclusively on financial crimes.

The law has been used in recent decades to secure more than a billion dollars for the state and millions in consumer relief, according to the Attorney General's Office. It was used in recent years, for example, to seek restitution for victims of Hurricane Sandy.

One such case, brought by Schneiderman's office, resulted in last year's decision from the Court of Appeals that cut the statute of limitations in half.

Schneiderman's office was pursuing civil claims in 2012 against Credit Suisse, a global financial services company, for allegedly misleading investors about the quality of loans that embodied residential mortgage-backed securities sold in 2006 and 2007.

That type of civil litigation, both from the attorney general and between financial services companies, has been common since the Great Recession of the last decade.

But, in the Credit Suisse case, there was a question as to whether those claims were subject to a three- or six-year statute of limitations under different sections of the state's civil practice law and rules.

State Solicitor General Barbara Underwood, who would later succeed Schneiderman as an interim attorney general, had argued at the time that the claims were subject to a six-year statute of limitations because they were alleged as common-law fraud.

Credit Suisse had argued at the time that, because the laws imposed a new liability, the statute of limitations was limited to three years. The company was represented by Richard Clary, a partner at Cravath, Swaine & Moore.

Chief Judge Janet DiFiore, writing for the majority, agreed with the latter interpretation of the law.

"The Martin Act imposes numerous obligations—or 'liabilities'—that did not exist at common law, justifying the imposition of a three-year statute of limitations under CPLR 214(2)," DiFiore wrote.

The legislation signed by Cuomo Monday, instead, moves the Martin Act to a different part of the state's civil practice law to allow a six-year statute of limitations. The change takes effect immediately.

"At a time when the Trump administration is hell-bent on rolling back consumer financial protections, New York remains dedicated to preventing and prosecuting fraudulent financial activity," Cuomo said.

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