Recent Appellate Securities Decisions
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.
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.
The Superior Court properly denied relief on the basis that the statute of limitations did not apply in a Securities administrative action.
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.
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. 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.
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.
Purvis v. ACC, Arizona Court of Appeals No, 1 CA-CV 10-0311 (Opinion)
1. The ACC did not err in finding the promissory notes issued in connection with the bridge loans were securities.
2. The ACC did not err in finding Respondent was required to register as a dealer or salesman before selling his stock.
3. The ACC did not err in finding the evidence was sufficient to support findings that Respondent committed fraud in connection with the sale of stock.
4. The ACC’s calculations of restitution and penalties are supported by the evidence.