Securities Division

Recent Appellate Securities Decisions

January 13, 2023

ACC v. Ronald F. Stevenson, Maricopa County Superior Court No. LC2022-000130-001, appeal of Decision 78528.

1. The Commission did not abuse its discretion in determining that appellants failed to establish the elements of their equitable estoppel defense. 
2. The Commission did not abuse its discretion or commit an error of law in concluding that appellants engaged in fraudulent practices in violation of A.R.S. § 44-1991(a)(2).
3. The amount of the Commission’s restitution award does not violate the Eighth Amendment to the United States Constitution or Article 2 § 15 of the Arizona Constitution.
4. A.R.S. § 44-2032(1) and Ariz. Admin. Code R-14-4-308 are not unconstitutionally vague. 
5. Ariz. Admin. Code R-14-4-308 does not exceed the authority granted by A.R.S. § 44-2032(1).
6. The Commission did not abuse its discretion and/or commit an error of law in ordering appellants to pay administrative penalties of $250,000 pursuant to A.R.S. § 44-2036.
7. The Commission did not abuse its discretion and/or commit an error of law in ordering appellants to pay administrative penalties of $25,000 pursuant to A.R.S. §§ 44-3296 and -3201. 
8. The Commission did not abuse its discretion and/or commit an error of law in ordering the revocation of Respondents’ licenses. 

March 15, 2022

Isaias Verdugo v. ACC, Maricopa County Superior Court No. LC2021-000080, appeal of Decision 77902.

1. The Commission did not abuse its discretion in concluding that the underlying transactions constituted notes and were not otherwise exempt securities for purposes of the Securities Act.
2. The Commission did not abuse its discretion in concluding Appellant committed fraudulent practices in violation of A.R.S. § 44-1991(A) and was the controlling person of an entity who also violated the statute.
3. The restitution award set forth in the Decision was supported by substantial evidence.

February 3, 2022

Ventures 7000, LLC, at al. v ACC, Arizona Court of Appeals No. 1 CA-CV 21-0179 (Memorandum).

1. Substantial Evidence Supports the Commission’s Findings that Twyman and Ventures Induced and Participated in Unlawful Sales of Securities to Investors.
2. Substantial Evidence Supports the Commission’s Finding that the Entity Directly Violated A.R.S. § 44-1991(A)(2) and that, as a Controlling Person of It, the Individual Is Jointly Liable for the Violation.
3. The Commission Did Not Violate Appellants’ Due Process Rights by Allowing a Victim Investor to Make Statements Not Subject to Cross-examination at an Open Meeting.

February 3, 2022

Upstate Law Group, LLC, et al. v. ACC, Maricopa County Superior Court No. LC2021-000001, appeal of Decision 77806.

1. The Commission did not abuse its discretion or otherwise err in concluding that the pension income stream transactions constituted securities.
2.  The Commission did not abuse its discretion or otherwise err in concluding that the pension income stream transactions were not exempt from registration under the Arizona Securities Act.
3. The Commission did not abuse its discretion or otherwise err in concluding that Appellants “participated in and induced” the unlawful sale of securities.
4. The Commission did not abuse its discretion or otherwise err in concluding that Appellants committed fraudulent practices in violation of A.R.S. § 44-1991(A).
5. The Commission did not abuse its discretion or otherwise err in concluding that Appellants violated A.R.S. §§ 44-1841 and -1842.
6. The Commission did not abuse its discretion or otherwise err in concluding that Appellants did not act in the ordinary course of their professional capacity in connection with the sale of securities.
7. The Commission did not abuse its discretion or otherwise err in concluding that the individual respondent had control person liability for the entity.
8. The Commission did not abuse its discretion or otherwise err in entering orders against Appellants to cease and desist and to pay restitution and administrative penalties. 

December 21, 2021

Smith & Cox, LLC, et al v. ACC, Maricopa County Superior Court No. LC2020-000322-001, appeal of Decision 77747. 

1. The pension income stream investments sold in this matter are evidences of indebtedness and thus are securities within the meaning of  A.R.S. § 44-1801(27). 
2. Defendant failed to meet his burden of proof needed to establish a defense to control person liability. 
3. It is Defendants’ burden of proof to provide evidence establishing offsets to the restitution award.

January 29, 2021

Ventures 7000 LLC, et al. v. ACC, Maricopa County Superior Court No. LC2020-000093-001, appeal of Decision 77547.

1. Substantial Evidence Supports that Appellants Induced and Participated in the Unlawful Sale of Securities.
2. Substantial Evidence Supports the Commission's Determination of Controlling Person Liability. 
3. The Commission Did Not Violate Due Process By Permitting an Investor to Address the Commission at Open Meeting.
4. Appellants Were Not Entitled to a Jury Trial.

June 11, 2020

Timothy John Wales, et al. v. ACC, Arizona Court of Appeals No. 1 CA-CV 19-0345 (Opinion).

1. Respondents were not entitled to a trial de novo in Superior Court pursuant to A.R.S. § 12-910 as the Commission stenographically recorded the hearing.
2. Respondents’ due process rights were not violated by the involvement of two ALJs.
3. Substantial evidence supports the Commission’s determination that Respondents sold unregistered securities.
4. The securities that were sold were not exempt from registration under the limited offering exemption or the non-public offering exemption.
5. The Commission did not abuse its discretion in ordering Respondents to pay restitution of $526,500.

January 21, 2020

Concordia Finance Co. v. ACC, Maricopa County Superior Court No. LC2019-0001109, appeal of Decision 77088.

1. Respondent does not have a right to a jury trial in an administrative proceeding under the Securities Act.
2. There is no conflict of interest requiring a Commissioner to recuse himself merely because counsel for Respondents also represents another party in litigation involving the Commissioner.
3. Laches is not available as a defense in a governmental action.
4. The Commission appropriately awarded restitution as allowed by R14-4-308.
5. As long as the administrative penalty falls within the statutory limits, the amount awarded is not an abuse of discretion and no explanation of the amount awarded is necessary.
6. Substantial evidence supported the restitution and penalty orders.

December 5, 2019

George T. Simmons, et al. v. ACC, Arizona Court of Appeals Nos. 1 CA-CV 19-0047 and 19-0048 (Memorandum).

The ACC reasonably concluded that respondents possessed legal power and control over the entity that violated A.R.S. § 44-1991 and properly found the respondents liable as control persons under A.R.S. § 44-1999.

November 19, 2019

Justin C. Billingsley et al. v. ACC, Arizona Court of Appeals No. 1 CA-CV 18-0630 (Memorandum).

1. The Commission proved the promissory notes were securities, with respondent failing to meet his burden to prove any exemptions to registration.
2. The Commission properly proved respondent committed securities fraud by misrepresenting the risk involved in the investment, while omitting material information as to the use of funds and prior payment defaults.
3. The marital community was liable for restitution even though respondent and his spouse moved from Arizona after incurring the debt.
4. The Commission decision contained sufficiently comprehensive and explicit findings and did not need to expressly address all of respondent's exceptions.

June 11, 2019

Richard C. Harkins v. ACC, Maricopa County Superior Court No. LC2018-000101, appeal of  ACC Decision 76529.

1. Respondent’s due process rights were not violated by the hearing and Open Meeting process or by the Administrative Law Judge’s absence from Open Meeting.
2. Respondent did not have the right to a jury trial on the administrative securities fraud allegations.
3. Proof of loss causation is not required in Commission Enforcement Actions.
4. Substantial evidence supported the Commission’s finding that Respondent was liable for fraud.

November 19, 2018

George T. Simmons et al. v. ACC, Maricopa County Superior Court No. LC2018-000077, appeal of  ACC Decision 76529.

The ACC correctly applied the control person liability standard in Eastern Vanguard Forex, Ltd. v. ACC and properly found the respondents liable as control persons.

October 23, 2018

Colleen Ellis v. ACC, Maricopa County Superior Court No. LC2018-000066, appeal of ACC Decision 76541.

The Commission properly found the marital community of the respondent to be jointly and severally liable to pay restitution and an administrative penalty.

August 20, 2018

Justin C. Billingsley et ux. v. ACC, Maricopa County Superior Court No. LC2017-000498, appeal of  ACC Decision 74743.

1. The Commission properly found personal and subject matter jurisdiction over respondent's spouse.
2. The promissory notes are issues were nonexempt securities.
3. Substantial evidence supported the securities law violations.
4. The Commission properly considered the exceptions raised by respondents.
   

December 13, 2016

Shudak v. ACC, Arizona Court of Appeals No. 1 CA-CV 15-0522 (Memorandum)

1. The Commission properly found the offering was not exempt from registration.
2. The Commission properly found respondent liable as a control person.
3. The Commission properly found respondent violated the Securities Act.
4. The restitution and administrative penalties imposed were proper. 
5. Respondent’s due process rights were not violated by the involvement of two ALJs.
6. Respondent had proper and timely notice of all charges against him.
   

September 15, 2016

Denver Energy Exploration, LLC v. ACC, Arizona Court of Appeals No. 1 CA-CV 15-0553 (Memorandum)

The failure to disclose a prior regulatory order against respondent was a violation of A.R.S. § 44-1991. 

June 2, 2016

Bersch v. State of Arizona, Arizona Court of Appeals No. 1 CA-CV 15-0340, (Memorandum) 

The Superior Court properly denied relief on the basis that the statute of limitations did not apply in a Securities administrative action.

September 17, 2015

Shorey v. ACC, Arizona Court of Appeals No. 1 CA-CV 14-0471 (Opinion)

1. The registration requirements of A.R.S. §§ 44-1841 and -1842 apply to an Arizona corporation selling securities solely to overseas investors.
2. The disclosure requirements of A.R.S. § 44-1991 require a corporation to disclose to investors a sales commission rate of 72.5% of all investment monies.
3. A.R.S. §§ 44-1841, -1842, or -1991 are not preempted by Federal law.
4. Regulation S, 17 C.F.R. §§ 230.901 to .904, does not exempt a corporation selling securities to overseas investors from complying with state securities laws.
5. Enforcement of A.R.S. §§ 44-1841, -1842, or -1991 against an Arizona corporation selling securities solely to overseas investors does not violate the Commerce Clause of the U.S. Constitution.
   

June 25, 2015

Hirsch v. ACC, Arizona Court of Appeals No. 1 CA-CV 14-0408 (Opinion)

1. The ACC is not required to prove loss causation in an action for enforcement of the Arizona Securities Act (ASA).
2. The ACC presented sufficient evidence to support a finding that Appellants committed nine hundred violations of the anti-fraud provisions of the ASA, contained in A.R.S. § 44-1991(A).
3. 3. The ACC did not abuse its discretion in imposing administrative penalties, totaling $2.15 million, against Appellants, for their violations of the ASA. 
4. The ACC did not abuse its discretion in ordering Appellants to pay restitution, as defined in the ASA, in the full amount of the principal solicited from participants through the loan program in the amount of $189,800,867, rather than limiting the order to the profits Appellants personally retained.
   

June 16, 2015

Shorey v. ACC, Arizona Court of Appeals No. 1 CA-CV 14-0510 (Memorandum)

1. The ACC did not err in finding control person liability.
2. The good faith exception to control person liability did not apply.