New York Blue Sky Laws: The Martin Act and Its Enforcement

The New York Martin Act is the state’s securities law, codified at Article 23-A of the General Business Law, and it gives the Attorney General broad authority to register the people who sell investments in New York, investigate suspected fraud, and prosecute violations without having to prove that anyone intended to cheat. Enacted in 1921, it reaches further than most state blue sky laws and, in some respects, further than federal securities law. If you raise capital, sell investment interests, or advise investors from or into New York, the Act sets the rules you operate under.

Who and What the Act Covers

The Act applies to essentially anyone involved in offering, selling, or purchasing securities in or from New York: broker-dealers, issuers, salespersons, and investment advisers. Being based elsewhere does not help. The statute contains its own provisions for service of process on out-of-state brokers, dealers, and advisers doing business in the state.¹

“Security” is defined expansively. Beyond stocks and bonds, the term captures real estate syndication interests, cooperative apartment shares, condominium units, timeshare interests, and resort developments.² Theatrical syndications have their own dedicated regulatory framework under Part 50 of the Attorney General’s regulations.³ The Attorney General has also applied the Act to cryptocurrency platforms, treating certain digital tokens as securities or commodities that trigger broker-dealer registration.⁴

Registration Requirements

Unlike many state blue sky regimes, the Martin Act does not require blanket registration of every security offered. It mandates registration for specific categories — mainly real estate syndications, theatrical syndications, and certain intrastate offerings — while requiring, more broadly, that the people and firms selling securities be registered.¹

Firms

Which form you file depends on the business. Non-FINRA broker-dealers file Form M-1 with a $1,200 fee, valid for four years. Issuers of non-covered securities file Form M-11, with a fee of $1,200 for offerings above $500,000 or $300 for smaller ones. Real estate broker-dealers selling cooperative, condominium, or homeowners’ association interests file Form M-10 at $300 plus $15 for each principal.⁵ FINRA members register through the Central Registration Depository (CRD) instead of paper forms, though they must already hold FINRA and SEC approval.⁶

The forms demand detailed disclosure. Form M-1, for instance, requires names, dates of birth, Social Security numbers, and residential addresses of all principals and officers, along with the firm’s answers on whether anyone affiliated has been suspended from a securities exchange, had a license revoked, been enjoined from selling securities, or been convicted of any crime.⁷ Filings go to the Investor Protection Bureau at the Department of Law. Except for sales of covered securities, no offers or sales may be made until the registration statement is accepted for filing.⁶

Salespersons

Individuals selling securities register separately. Non-FINRA salespersons file Form M-2 with a $150 fee, valid for four years, and must pass either the Series 63 (Uniform Securities Agent State Law Exam) or the Series 66 (Uniform Combined State Law Exam). FINRA-registered salespersons file through CRD and face the same exam requirement. There are no exemptions for salespersons.⁶

One narrow exception: officers, directors, principals, or partners of an issuer who are already listed on the firm’s Form M-11 or Form D may offer and sell that issuer’s securities without registering separately. Issuer agents who are not listed on those forms must register and pay the salesperson fee. Fingerprinting is generally required for all persons employed by registered broker-dealers, though not for personnel of securities issuers.⁶

Investment Advisers

Investment advisers run on a different track. Firms file Form ADV (Parts 1A, 1B, 2AB, and an execution page) through the Investment Adviser Registration Depository (IARD). Individual representatives, along with principals and supervisors of state-registered advisers, file Form U4 through CRD.⁸ Exam requirements are set by Sections 11.6 and 11.7 of the state’s investment adviser regulations.⁹

Renewals

Issuer statements are valid for four years and must be renewed if sales continue. The renewal date and file number appear on the fee receipt issued after initial processing. Issuers of covered securities who are not required to file a Further State Notice keep their filing status current by amending the underlying Form D, Form NF, or Regulation A notice as circumstances change.⁶

Exemptions and Federal Preemption

Not every security sold in New York requires state registration, and the biggest reason is federal preemption. The National Securities Markets Improvement Act of 1996 (NSMIA) stripped states of the power to impose their own registration requirements on “covered securities,” including those listed on the NYSE, Nasdaq, or other SEC-designated national exchanges; securities issued by registered investment companies; and offerings made under Rule 506 of Regulation D.¹⁰ For covered securities, New York can still demand notice filings and collect fees, but it cannot block the offering through its own registration process.

The state statute adds more exemptions. Under GBL Section 359-f, the dealer registration requirements do not apply to transactions in government-issued securities (federal, state, or municipal), securities issued by banks and savings institutions subject to federal or state examination, securities of regulated public utilities, or securities of corporations organized exclusively for educational or charitable purposes.¹¹

Issuers relying on federal Regulation D to sell covered securities in New York provide notice through the Electronic Filing Depository (EFD) operated by the North American Securities Administrators Association. Once the notice and fee are submitted, the filing is complete and the issuer may continue sales activity unless the state raises a deficiency. A trap: if the offering does not actually qualify for the exemption claimed on Form D, the notice filing is void from the start, even if no deficiency notice was ever sent.¹²

NSMIA does not preempt everything. Intrastate offerings, Rule 504 offerings, and certain Regulation A offerings remain subject to full state registration. And regardless of preemption, New York retains complete authority to investigate and prosecute fraud involving any security sold in the state.

Real Estate and Theatrical Syndications

Real estate offerings get a special regime. GBL Section 352-e makes it unlawful to publicly offer real estate securities in or from New York without filing a written offering statement or prospectus with the Attorney General’s office. Before approaching investors, the issuer must register as a dealer and have its offering documents accepted by the Real Estate Finance Bureau.² The requirement reaches limited partnership interests in real estate, REIT shares, cooperatives, condominium units, and resort timeshares.

Theatrical syndications follow Part 50. An issuer of interests in a theatrical production company files offering literature with the Investor Protection Bureau and distributes it to prospective investors. Offerings of $500,000 or less can satisfy the prospectus requirement with a clear investment agreement in readable print. Offerings made to fewer than 36 people can skip the formal filing entirely, provided each investor signs a written waiver acknowledging that no literature has been filed with or examined by the Attorney General. Organizational and offering expenses, including attorney and filing fees, cannot exceed 15% of gross proceeds.³

How the Attorney General Investigates and Enforces

The Attorney General’s investigative authority is what sets the Martin Act apart. The statute allows the AG to subpoena witnesses, compel their attendance, examine them under oath, and require production of any books or papers deemed relevant. None of this requires filing a lawsuit first. A full investigation with subpoena power can precede any court proceeding, and refusing to comply with a subpoena or refusing to answer questions is itself a misdemeanor.¹

The legal standard for violations is where the Act really shows its teeth. In civil enforcement actions and misdemeanor prosecutions, the state does not need to prove the accused intended to defraud anyone. The statute prohibits not only deliberate lies, but also statements made by someone who “with reasonable effort could have known the truth” or who “made no reasonable effort to ascertain the truth.” It does not matter whether anyone actually bought or sold a security as a result.¹³ That is a considerably lower bar than federal securities law, which generally requires proof of intentional deception.

Intent does matter for felony liability. A violation escalates to a Class E felony when someone intentionally engages in an ongoing scheme to defraud ten or more people, or intentionally commits fraud that results in obtaining property worth more than $250.¹³ A Class E felony in New York carries up to four years in prison.

Penalties and Injunctions

Once the AG uncovers a violation, the remedies are substantial. The office can seek a preliminary or permanent injunction barring an individual or firm from selling or offering securities to the public in New York. If the defendant refused to comply with subpoenas or refused to answer questions during the investigation, that refusal alone serves as prima facie proof of fraudulent practices, and the court can issue a permanent injunction without further evidence from the AG.¹⁴

On the criminal side, basic violations are misdemeanors carrying up to one year in jail. Felony violations carry up to four years. The AG has also used the Act to secure large monetary recoveries through settlements, including a $24 million multistate recovery against Nexo and a settlement of nearly $1 million with BlockFi Lending for offering unregistered securities.⁴

Investors Cannot Sue Under the Act

One boundary trips up many investors: the Martin Act does not create a private right of action. Enforcement belongs exclusively to the Attorney General. The New York Court of Appeals settled the point in CPC International v. McKesson Corp. in 1987 and has reaffirmed it since. A claim whose only basis is a Martin Act violation cannot be brought by the investor.

Investors are not out of options. Common-law claims for fraud, breach of contract, or breach of fiduciary duty remain available where the claim has an independent legal basis and does not depend entirely on a Martin Act violation. The test courts apply is whether the claim “would not exist but for the statute.” If it would, the claim is preempted; if the underlying conduct also violates general fraud principles, the investor can proceed. That distinction matters most in real estate syndication disputes and cooperative conversion cases, where disclosure duties often originate in Martin Act regulations rather than general contract law.

Cryptocurrency and Digital Assets

The AG has applied the Act aggressively to the crypto industry, treating the sale of certain digital tokens as unregistered securities or commodities activity. The theory is direct: if a platform lets New York residents buy and sell tokens that function as securities, the platform must register as a broker-dealer under GBL Section 359-e like any traditional brokerage. Platforms that call themselves “exchanges” face an additional prohibition unless they are registered as a national securities exchange with the SEC or designated as a contract market by the CFTC.¹³

Recent actions show how that plays out. The AG sued CoinEx for operating as an unregistered broker-dealer and falsely presenting itself as an exchange. Nexo paid $24 million in a multistate settlement for operating illegally. The former CEO of Celsius was sued for defrauding investors and concealing the company’s financial condition. In each matter, the Act’s low burden of proof and broad subpoena power gave the AG tools that federal regulators sometimes lack.⁴ Any platform with New York customers should assume the office is paying attention.

1
New York State Senate. New York General Business Law Article 23-A – Fraudulent Practices In Respect to Stocks, Bonds and Other Securities
2
New York State Attorney General. Real Estate Syndications
3
New York Office of the Attorney General. Part 50 Theatrical Financing
4
New York State Office of the Attorney General. Attorney General James Sues Cryptocurrency Platform for Failing to Register in New York
5
Legal Information Institute. New York Code 13 NYCRR 10.8 – Filing Fees
6
New York State Attorney General. Broker-Dealer and Securities Issuers Registration
7
New York State Office of the Attorney General. Broker/Dealer Statement – Section 359-e General Business Law
8
New York State Attorney General. Investment Advisers
9
New York State Attorney General. Investment Advisers FAQ
10
Office of the Law Revision Counsel. 15 U.S. Code 77r – Exemption from State Regulation of Securities Offerings
11
New York State Senate. New York General Business Law 359-F – Exemptions from Certain Provisions of Section Three Hundred Fifty-Nine-E
12
Office of the New York State Attorney General. Guidance on Mandatory Filing of Form D with Electronic Filing Depository for Federal Covered Regulation D Dealers
13
New York State Senate. New York General Business Law 352-C – Prohibited Acts Constituting Misdemeanor; Felony
14
New York State Senate. New York General Business Law 353 – Action by Attorney-General