S T A T E O F N E W Y O R K ________________________________________________________________________ 5093 1997-1998 Regular Sessions I N A S S E M B L Y March 3, 1997 ___________ Introduced by M. of A. KOON, LUSTER, WARNER -- read once and referred to the Committee on Banks AN ACT to amend the general business law, the civil practice law and rules and the banking law, in relation to addressing the issue of investment fraud restitution and providing for the repeal of certain provisions of the civil practice law and rules and the banking law upon expiration thereof The People of the State of New York, represented in Senate and Assem- ______________________________________________________________________ bly, do enact as follows: _________________________ 1 Section 1. The opening paragraph of section 396-d of the general 2 business law is designated subdivision (a) and a new subdivision (b) is 3 added to read as follows: 4 (b) No person shall advertise or describe to any other person, firm or ______________________________________________________________________ 5 corporation in the sale, lease or other transaction of real property, ________________________________________________________________________ 6 that a filing with the department of law, of an offering statement or ________________________________________________________________________ 7 statements or prospectus for the issue or sale of securities as required ________________________________________________________________________ 8 by subdivision one of section three hundred fifty-two-e of this article, ________________________________________________________________________ 9 constitutes the approval of, or the endorsement of, such issue or sale ________________________________________________________________________ 10 by the department of law or the attorney general of this state. Any ________________________________________________________________________ 11 person who makes such a representation for the purpose of inducing or ________________________________________________________________________ 12 promoting a person to purchase, distribute, exchange, sell, or negotiate ________________________________________________________________________ 13 such securities shall be guilty of a class A misdemeanor. _________________________________________________________ 14  2. Subdivision 4 of section 352-e of the general business law, as 15 added by chapter 987 of the laws of 1960, is amended to read as follows: 16 4. In all literature employed in the offer and sale of securities 17 defined in subdivision one of this section and in all advertising in 18 connection therewith there shall be contained, in easily readable print 19 on the face thereof, a statement that the filing of an offering state- 20 ment or statements or prospectus as required by subdivision one of this 21 section with the department of law does not constitute approval of, or ____ EXPLANATION--Matter in italics (underscored) is new; matter in brackets _______ [ ] is old law to be omitted. LBD05626-02-7 A. 5093 2 1 the endorsement of, the issue or the sale [thereof] of such securities ___________________ ____________________ 2 by the department of law or the attorney general of this state. 3  3. Section 352-c of the general business law is amended by adding a 4 new subdivision 5-a to read as follows: 5 5-a. No person shall represent that a filing with the department of ______________________________________________________________________ 6 law, of an offering statement or statements or prospectus for the issue ________________________________________________________________________ 7 or sale of securities as required by subdivision one of section three ________________________________________________________________________ 8 hundred fifty-two-e of this article, constitutes the approval of, or the ________________________________________________________________________ 9 endorsement of, such issue or sale by the department of law or the ________________________________________________________________________ 10 attorney general of this state. Any person who makes such a represen- ________________________________________________________________________ 11 tation for the purpose of inducing or promoting a person to purchase, ________________________________________________________________________ 12 distribute, exchange, sell, or negotiate such securities shall be guilty ________________________________________________________________________ 13 of a class A misdemeanor. _________________________ 14  4. The civil practice law and rules is amended by adding a new 15 section 219 to read as follows: 16  219. Limitation of certain actions concerning investment fraud. 1. ______________________________________________________________________ 17 Any action brought by a private party or parties pleading liability ________________________________________________________________________ 18 arising from fraud, contract, or tort, with respect to the sale and/or ________________________________________________________________________ 19 purchase of an interest in real property located in the states of ________________________________________________________________________ 20 Tennessee, Kentucky or Missouri, or any securities relating to the same ________________________________________________________________________ 21 as defined in article twenty-three-A of the general business law, when ________________________________________________________________________ 22 such sale and/or purchase occurred between nineteen hundred eighty-five ________________________________________________________________________ 23 and nineteen hundred ninety, shall be commenced within thirteen years of ________________________________________________________________________ 24 the date of such sale or purchase, whichever is later. ______________________________________________________ 25 2. A judicial determination made in an action pleading liability aris- ______________________________________________________________________ 26 ing from fraud, contract, or tort, with respect to the sale and/or ________________________________________________________________________ 27 purchase of an interest in real property located in the states of ________________________________________________________________________ 28 Tennessee, Kentucky or Missouri, or any securities relating to the same ________________________________________________________________________ 29 as defined in article twenty-three-A of the general business law, when ________________________________________________________________________ 30 such sale and/or purchase occurred between nineteen hundred eighty-five ________________________________________________________________________ 31 and nineteen hundred ninety, when such action was commenced before nine- ________________________________________________________________________ 32 teen hundred ninety-five, shall not be used by any subsequent court of ________________________________________________________________________ 33 record in New York as claim preclusion or issue preclusion in any subse- ________________________________________________________________________ 34 quently brought action pleading liability arising from fraud, contract, ________________________________________________________________________ 35 or tort, with respect to the sale and/or purchase of an interest in real ________________________________________________________________________ 36 property located in the states of Tennessee, Kentucky or Missouri, or ________________________________________________________________________ 37 any securities relating to the same as defined in article twenty-three-A ________________________________________________________________________ 38 of the general business law, when such sale and/or purchase occurred ________________________________________________________________________ 39 between nineteen hundred eighty-five and nineteen hundred ninety, pursu- ________________________________________________________________________ 40 ant to the doctrines of res judicata or collateral estoppel. ____________________________________________________________ 41 3. Any action brought by the attorney general pursuant to article ______________________________________________________________________ 42 twenty-three-A of the general business law, with respect to the sale ________________________________________________________________________ 43 and/or purchase of an interest in real property located in the states of ________________________________________________________________________ 44 Tennessee, Kentucky or Missouri, or any securities relating to the same ________________________________________________________________________ 45 as defined in article twenty-three-A of the general business law, when ________________________________________________________________________ 46 such sale and/or purchase occurred between nineteen hundred eighty-five ________________________________________________________________________ 47 and nineteen hundred ninety, shall be commenced within thirteen years of ________________________________________________________________________ 48 the date of the last such sale or purchase, whichever is later. _______________________________________________________________ 49  5. The banking law is amended by adding a new section 103-a to read 50 as follows: 51  103-a. Limitations on certain recourse loans. Notwithstanding any ______________________________________________________________________ 52 other provision of law, any loan, mortgage, note, or instrument of ________________________________________________________________________ 53 indebtedness secured by an interest in real property located in the ________________________________________________________________________ 54 states of Tennessee, Kentucky or Missouri, or by securities relating to ________________________________________________________________________ 55 the same as defined in article twenty-three-A of the general business ________________________________________________________________________ 56 law, executed as a recourse loan, mortgage, note or instrument of ________________________________________________________________________ A. 5093 3 1 indebtedness upon the sale and/or purchase of such real property or ________________________________________________________________________ 2 securities between nineteen hundred eighty-five and nineteen hundred ________________________________________________________________________ 3 ninety, regardless of the text of the loan, mortgage, note, or instru- ________________________________________________________________________ 4 ment of indebtedness, shall be deemed as fraudulent and void with ________________________________________________________________________ 5 respect to the recourse provisions, and such loan, mortgage, note, or ________________________________________________________________________ 6 instrument of indebtedness shall be deemed only to be a valid nonrec- ________________________________________________________________________ 7 ourse loan, mortgage, note or instrument of indebtedness, if a represen- ________________________________________________________________________ 8 tation was made to the obligor, by any person promoting, facilitating, ________________________________________________________________________ 9 or inducing the obligor to purchase an interest in such real property ________________________________________________________________________ 10 located in the states of Tennessee, Kentucky or Missouri, or in securi- ________________________________________________________________________ 11 ties relating to the same as defined in article twenty-three-A of the ________________________________________________________________________ 12 general business law, and any collection upon, or satisfaction of, such ________________________________________________________________________ 13 loan, mortgage, note, or instrument of indebtedness shall be limited ________________________________________________________________________ 14 solely to the security taken in the interest in real property located in ________________________________________________________________________ 15 the states of Tennessee, Kentucky or Missouri, or in the securities ________________________________________________________________________ 16 relating to the same as defined in article twenty-three-A of the general ________________________________________________________________________ 17 business law, and no court of record in the state of New York shall ________________________________________________________________________ 18 enforce a judgment against such an obligor for the collection of any ________________________________________________________________________ 19 deficiency amount arising from the default of such loan, mortgage, note, ________________________________________________________________________ 20 or instrument of indebtedness. ______________________________ 21  6. This act shall take effect on the one hundred twentieth day after 22 it shall have become a law, except that section three of this act shall 23 expire and be deemed repealed on January 1, 2007, and section four of 24 this act shall expire and be deemed repealed on January 1, 2027.