AG hits back at reports Trump could scuttle anti-fraud Blue Sky laws

Attorney General Eric Schneiderman is ringing the alarm bell after reports that President-elect Donald Trump’s transition team is examining the prospect of crafting legislation that would scuttle state “Blue Sky” laws that allow for oversight of businesses, including banks and financial firms. In New York, those laws include the Martin Act, which has been used by a long list of attorney’s general to bring fraud cases against large Wall Street firms.

Fox Business reported earlier this week that Trump transition team member Paul Atkins, CEO of Wall Street consulting firm Patomak Global Partnershas, has been “discussing ways to ensure that federal securities laws preempt state laws. Atkins is reportedly a contender to run the Securities and Exchange Commission, which would see its power grow from the neutering of state enforcement statutes in the financial sector.

Here’s Schneiderman’s statement:

“I am deeply troubled by reports that the Presidential Transition Team is considering ways to eviscerate some of the most basic consumer and investor protection laws in the country. Every day, state and local law enforcement effectively utilize Blue Sky laws to root out the worst types of fraud, corruption, and abuse on Wall Street and across major industries. 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. In the past few years alone, multi-state fraud investigations into Wall Street’s role into the collapse of the housing market have recovered over $95 billion in fines, penalties, and most important, consumer relief. The investigations and prosecutions made possible by state anti-fraud statutes are among the most effective deterrents of misconduct, and regularly lead to critical updates to federal securities laws and enforcement practices of consumer protection laws. Any attempt to gut these consumer and investor protections would severely undercut state police powers and only embolden those who seek to defraud and exploit everyday Americans. At a time of regulatory uncertainty at the federal level, it is essential that we maintain the very laws that have helped state and local law enforcement keep consumers and investors safe for over one hundred years.”