Armed with the formidable Martin Act, the NY Attorney General’s office has long been one the most powerful state regulators in the country, but a WilmerHale memo says that if legislation introduced by NY Gov. Andrew Cuomo is enacted, the AG won’t be The Empire State’s only regulatory colossus:
In legislative language accompanying his proposed budget, New York Governor Andrew M. Cuomo proposes to significantly expand the powers of the New York Department of Financial Services (DFS), the state’s banking and insurance regulator. The Governor’s proposal would enlarge the department’s mission beyond banking and insurance oversight, transforming DFS into perhaps the most powerful state regulator in the nation, with new and broad jurisdiction and substantial enforcement powers over consumer products and services, business to business arrangements, and securities and investment advice.
Though significant in its scope, the Cuomo proposal is in many respects unsurprising. The Governor created DFS in 2011 upon merging the state’s Banking Department and Insurance Department; he initially sought to give DFS powers under the Martin Act, the state’s broad “blue sky” securities statute, but the Legislature declined to do so. Governor Cuomo has, however, expanded DFS’s jurisdiction in other ways in the years since its creation, including by granting it powers to police the state’s student loan servicing industry.
Among other things, the proposal would amend New York’s Financial Services Law to add securities to the definition of “financial product or service” and give DFS the power to regulate the provision of investment advice. As a result, the memo says that the proposal would effectively make DFS another securities regulator. There are a number of other provisions that would enhance DFS’s power to protect consumers, and would also grant DFS jurisdiction over fraud or misconduct in business-to-business transactions.
-John Jenkins, TheCorporateCounsel.net February 26, 2020
