New York Income Claim Enforcement: A Script Review Method

What to take away

Four New York provisions and the question each one asks of a script

A recruiting script can meet four different New York provisions, and each asks a different question. The table sorts them by what the statute addresses, so a reviewer knows which question to put to a given line before the script is sent to a team.

None of the four sets approved wording. Each is aimed at conduct, so a company cannot copy a phrase from one and treat it as safe. Sections 349 and 350 are separate state-law provisions, which means one disclosure or one script change does not guarantee compliance under any of them.

How the Attorney General's consumer bureau reads a recruiting message

The Attorney General's office can review a recruiting message as a business statement, not as a private chat. On its own description, the Consumer Frauds and Protection Bureau prosecutes businesses and individuals engaged in fraudulent, misleading, deceptive, or illegal trade practices.

Settlements reached by that office have forced companies to change how they describe income to prospective distributors, not just how they describe it to customers. Settlement terms vary by case, so a general checklist should not be treated as the terms of a particular order issued by the Attorney General.

As practical compliance measures, companies can prohibit unsubstantiated income claims, require clear disclosures, and train distributors on approved language. For a selling network, the working question is whether the company can support the earnings claims its distributors repeat, and whether its review catches unsupported versions before publication.

Section 63(12) authorizes the Attorney General to pursue persistent fraud or illegality in business conduct. It is broader than the Martin Act's securities focus. The statute alone does not establish a specific distributor-script requirement, so a reviewer reads it as a reason to fix repeated claims, not as a source of approved language.

Federal law applies in New York as well. The FTC acts under a federal ban on unfair or deceptive acts or practices in or affecting commerce. That is a federal standard, not a term imposed by a New York settlement, unless a specific order says so. The income claim rules have their own guide.

When a pitch starts to read like an investment

The Martin Act becomes relevant when a script frames joining as an investment. It is a New York securities statute, codified at General Business Law sections 352 and 353, and it is not a general recruiting-script rule for every distributor message.

It gives the Attorney General broad authority to investigate and prosecute fraud in the offer and sale of securities. It does not require proof of intent to defraud, which makes it a powerful tool, and New York courts have read it broadly rather than narrowly.

An offering can therefore be examined even when a physical product also changes hands, if the money-making story is really about the opportunity. If recruits are told they will earn returns from a fee or from the efforts of others, that framing can attract securities-law attention.

Test a pitch with one question. Would a prospect read the sentence as money paid in and money coming back? Where the answer is yes, replace the return language with a plain account of the work: selling, serving customers, the hours involved and what it all costs.

Pitches that invite Martin Act scrutiny

What the Ernst & Young settlement shows and what it does not

The 2013 Ernst & Young settlement shows how far the Martin Act reaches, not what a recruiting script must say. Ernst & Young agreed to pay $10 million to settle the Attorney General's Martin Act claims over its audits of Lehman Brothers, without admitting wrongdoing.

That settlement concerned audits, not distributor earnings claims, and it did not set recruiting-script language. Its value to a reviewer is context only. The Act has been used against a major audit firm, so nobody should assume it applies solely to obvious investment schemes.

Treat any article, webinar or team chat that cites the settlement as a script rule with suspicion. A claim about what New York requires should point to a statute or to the text of a particular order, and a company file should record which one the reviewer relied on.

Five steps for reviewing a script before it goes out

A short approval step before a post or message goes out prevents most violations, and it creates a record that the company exercised oversight. Without the record, a company asked about a claim has only memory to rely on, and memory is a weak answer to an enforcement inquiry.

Build the step into onboarding so new distributors learn the approved lines before their first message. A recruiting team can then work from a distributor recruitment routine in which nobody improvises an income figure in a direct message.

Script lines to strike and how to rewrite them

Most failing scripts are not frauds. They are shortcuts: a line that worked in a warm market, spread through a team and became the default pitch. Five patterns recur, and each can be rewritten into process language without losing the invitation.

A compliant script is not a weaker script. It survives a records request, a platform takedown, and a conversation with a prospect who later feels misled. Regulators may treat job-replacement lines as earnings representations, and a hidden-cost omission is misleading by omission, so those two rows deserve the closest reading.

Start every rewrite by removing the numbers the distributor cannot document. If a figure stays, it needs a source, a time period and the disclosure sentence. Then swap outcome language for what the work involves: hours, activities, costs and the support available.

Place the disclosure where the claim appears, not in a link at the bottom. A disclosure a prospect has to hunt for does not cure a misleading headline. Where an income claim appears, a sentence such as this can sit beside it: "Ask to review the company's income disclosure statements."

Script controls to keep on file

Testimonials and income screenshots in a New York review

A testimonial or screenshot is reviewed as part of the pitch, not as a personal story. Used to promote an opportunity, it can communicate advertising claims for which a company or distributor may be responsible, so the substantiation duty travels with the image.

An income screenshot can mislead when it shows a single good month and presents that month as a normal result. It can also mislead if editing, cropping or blurring changes the impression it gives. Keep the original record, and avoid presenting an altered image as a complete account.

A testimonial may mislead when the speaker has a material connection to the company that is not disclosed, including a distributor who earns commission on people who see the post. Posts made on social media are treated as advertising statements, so the same rule applies there.

A lifestyle photo can do the same work as a number. A car, trip or house can communicate an income claim when it is presented as a result of the business, and an old result can mislead when it is shown as current income without making the time period clear.

Details to include with an income testimonial

Common questions