Assembly Bill A8646

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  8646

                       2009-2010 Regular Sessions

                          I N  A S S E M B L Y

                              June 2, 2009
                               ___________

Introduced  by M. of A. BRODSKY -- read once and referred to the Commit-
  tee on Governmental Employees

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  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  The  business  corporation law is amended by adding a new
section 631 to read as follows:
S 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  BUSI-
NESS  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,  CORPO-
RATION,  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 REASON-
ABLE  EFFORT  TO  ASCERTAIN  THE  TRUTH;  OR (IV) DID NOT HAVE KNOWLEDGE
CONCERNING THE REPRESENTATION OR STATEMENT MADE. WITH RESPECT TO ALLEGA-
TIONS 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.
                                                           LBD07536-03-9

A. 8646                             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.
  S  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:
  S  179-A.  ACTION BY CERTAIN PUBLIC PENSION PLAN OR FUND OR RETIREMENT
SYSTEM INVESTORS. 1. A PUBLIC RETIREMENT SYSTEM AS DEFINED  IN  SUBDIVI-
SION  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 REASON-
ABLE 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.
  S 3. This act shall take effect immediately and shall apply to  causes
of  action  accruing and actions pending before, on, or after its effec-
tive date.
  FISCAL NOTE.--This bill would  authorize  any  mutual  fund  or  other
institutional  investor  incorporated  under  the laws of New York state
that is damaged in the connection with the purchase or sale of a securi-
ty to bring an action for damages against the entity that  committed  or
participated in the commission of actions prohibited by section 352-c of
the General Business Law.
  If this bill is enacted, insofar as it would affect the New York State
and  Local Employees' Retirement System and the New York State and Local
Police and Fire Retirement System, there would not be any costs.
  This estimate, dated March 23, 2009, and intended for use only  during
the  2009  Legislative Session, is Fiscal Note No. 2009-198, prepared by
the Actuary for the New  York  State  and  Local  Employees'  Retirement
System  and  the  New  York  State  and Local Police and Fire Retirement
System.
  FISCAL NOTE.--This bill would renumber section 179-a of the Retirement
and Social Security Law to section 179-b and add  a  new  section  179-a

A. 8646                             3

which  would  allow  the  New  York State Teachers' Retirement System to
bring an action for damages  against  any  person,  partnership,  corpo-
ration,  company, limited liability company, trust, or association which
commits  or  participates  in any act prohibited by section 352-c of the
General Business Law in connection with the purchase or sale of a  secu-
rity.
  It  is estimated that there will be no annual cost to the employers of
members of the New York State Teachers' Retirement System if  this  bill
is enacted.
  The  source of this estimate is Fiscal Note 2009-69 dated May 27, 2009
prepared by the Actuary of  the  New  York  State  Teachers'  Retirement
System and is intended for use only during the 2009 Legislative Session.
  FISCAL  NOTE.--This  bill would provide the authority to institutional
investors, including the State and City of New York retirement  systems,
to  bring  actions for damages with respect to violations of the State's
securities laws.
  With respect to the City of New York, there  are  no  budgetary  costs
associated  with enactment of this bill. This bill would permit the City
to seek financial remedies and recoveries to  the  extent  that  certain
securities violations occurred.
  This  fiscal  note is intended solely for the 2009 legislative session
and was prepared by Andrew G. Dowling, Assistant Director, New York City
Office of Management and Budget.