Mens Rea and the Martin Act: A Weapon of Choice for Securities Fraud Prosecutions?
Jeff Izant, Mens Rea and the Martin Act: A Weapon of Choice for Securities Fraud Prosecutions?, 2012 Colum. Bus. L. Rev. 913.
Given the lack of significant federal criminal prosecutions stemming from the 2008 financial crisis, state enforcement—in particular, by the New York State Attorney General through Section 352-c of the General Business Law, known as the “Martin Act”—could play a larger role. This is because it is widely believed that the statute’s culpability standards are weaker than those required for prosecution under federal law. Were the Martin Act to become a more significant means of criminal prosecution however, its heightened use would inevitably magnify two major problems with the statute. First, the consensus view is that the Martin Act establishes strict liability for misdemeanor securities fraud crimes. Yet there has been almost no analysis of whether it is “appropriate” to prosecute securities fraud as a strict liability crime, at least under this provision. Second, in part because there have been so few Martin Act decisions, New York courts have had little opportunity to develop a cohesive doctrine of mens rea under the felony provisions of the statute. As a result, they have never thoroughly explained exactly what showing of culpability is required for felony liability, or how their interpretations comport with the Martin Act’s text and legislative history.
This Note demonstrates that the mental state requirements for Martin Act misdemeanor and felony liability need to be clarified and more thoroughly supported, especially because the statutory text and legislative history are somewhat ambiguous, and the subsequent jurisprudence has failed to provide a coherent explanation for the current state of the doctrine. Nonetheless, the Martin Act’s text, history and underlying policy rationale can be interpreted to support strict liability prosecution for misdemeanor securities fraud, and to impose felony liability for reckless violations of the statute.
Volume 2015 | Issue 2
A selection from our current issue.
- The Data Security Governance Conundrum: Practical Solutions and Best Practices for the Boardroom and the C-Suite
by Thad A. Davis, Michael Li-Ming Wong & Nicola M. Paterson
- Law in Regression? Impacts of Quantitative Research on Law and Regulation
by David C. Donald
- Preparing Financial Regulation for the Second Machine Age: The Need for Oversight of Digital Intermediaries in the Futures Markets
by Gregory Scopino
- Congress Killed the Radio Star: Revisiting the Terrestrial Radio Sound Recording Exemption in 2015
by Melanie Jolson
- A Safe Harbor from Spoliation Sanctions: Can an Amended Federal Rule of Civil Procedure 37(e) Protect Producing Parties?
by Alexander Nourse Gross
- Death and Live Feeds: Privacy Protection in Fiduciary Access to Digital Assets
by Jeehyeon (Jenny) Lee