New York's top law enforcement official said he does not want U.S. President-elect Donald Trump's administration to "eviscerate" the state's anti-fraud law that has dropped a hammer on Wall Street corruption.
New York Attorney General Eric Schneiderman said on Thursday he also is concerned about a possible effort by the incoming administration to undermine state securities laws nationwide.
"In many cases, these anti-fraud statues are consumers' and investors' first line of defense against exploitation, particularly when retail and institutional investor dollars are in the hands of increasingly complex and opaque financial institutions," Schneiderman said.
Schneiderman said he was deeply troubled by recent media that the transition team was considering ways to gut New York's Martin Act, the envy of securities regulators nationwide, including at the U.S. Securities and Exchange Commission.
The Martin Act allows an attorney general or the Manhattan District Attorney to bring civil and criminal cases without having to prove a defendant's intent or knowledge of wrongdoing. Prosecutors must only establish that a misrepresentation or omission of a material fact occurred when promoting a security, for example.
On Tuesday, Fox Business reported that former SEC Commissioner and Trump transition team member Paul Atkins had been discussing possible new U.S. legislation to override state securities laws. Such a bill could pass now that Republicans control both the House of Representatives and Senate.
Atkins, viewed by some as a top contender for chairman of the SEC, is well-known for his conservative views on everything from enforcement penalties to corporate governance.
Trump's transition team did not respond to an email. Ianthe Zabel, a spokeswoman for Atkins, declined to comment.
Several white-collar defense lawyers in New York have said they expect to see the Martin Act used more often during the Trump presidency.
Trump has pledged to dismantle Dodd-Frank, a sweeping Democrat-led reform of Wall Street designed to protect Main Street investors. This would effectively shift more securities enforcement responsibilities to state regulators.