Administrative Action Procedure
You just received a Notice of Opportunity for Hearing from the Securities Division of the Arizona Corporation Commission. What procedural requirements do you need to know to proceed as a respondent to an action against you by the Securities Division?
Respondent. If an action has been brought against you by the Securities Division, you are the “respondent.” You may have been named in the action because of your status as the spouse of an individual that the Securities Division alleges violated the Arizona Securities Act or the Investment Management Act. If you are the spouse, you are also a “respondent.” All respondents must appear and defend; a default order may be entered against any respondent who does not appear and defend according to the procedural rules that govern actions before the Corporation Commission. A.R.S. § 44-2031; § 44-3291; A.A.C. R14-3-103. (You may obtain a copy of the Arizona Securities Act, the Investment Management Act, and the rules under those Acts from the Division’s web site /divisions/securities/statutes_and_rules.asp).
Legal representation. You may want to obtain an attorney to represent you. Some attorneys specialize in securities matters. An individual may represent him or her self. An individual who is not an attorney may not represent any one else, including his or her spouse. Effective July 1, 2003, a legal entity, such as a corporation or limited liability company, may be represented by a full-time officer, partner, member or manager of a limited liability company, or employee, provided that: the legal entity has specifically authorized such person to represent it in the particular matter; such representation is not the person’s primary duty to the legal entity, but secondary or incidental to other duties relating to the management or operation of the legal entity; and the person is not receiving separate or additional compensation (other than reimbursement for costs) for such representation. An out-of-state attorney may be admitted pro hac vice to appear before the Corporation Commission. Rules 31 and 33, Rules of the Arizona Supreme Court. You may obtain a copy of rules 31 and 33 at azcourts.gov/rules
- Martindale and Hubbell is a company that provides information about lawyers and law firms. At www.Martindale.com you can search for an attorney by location and by type of practice.
- The Maricopa County Bar Association offers a lawyer referral service. Contact the Lawyer Referral Service at the Maricopa County Bar, 602-257-4200. www.maricopabar.org
- You may also contact the Arizona State Bar at 602-252-4804. You may search for attorneys by location or practice using the Member Finder at www.azbar.org.
Governing law. You need to be aware of the law that governs the administrative process; i.e. the rules that you follow in order to defend yourself before the Corporation Commission against the allegations made by the Securities Division. The following statutes and rules control the administrative proceeding in the following order of priority. If a provision in one statute or rule conflicts with a provisions in another statute or rule, in general, the statute or rule having priority as listed below controls.
- A.R.S. §§ 44-1971 through 44-1981. Statutes found in the Arizona Securities Act. A.R.S. §§ 44-3211 through 44-3231. Statutes found in the Investment Management Act. /divisions/securities/statutes_and_rules.asp
- A.A.C. R14-4-301 through R14-4-308. Rules promulgated under the Arizona Securities Act. /divisions/securities/statutes_and_rules.asp
- A.A.C. R14-3-101 through R14-3-113. Corporation CommissionRules of Practice and Procedure. You may obtain copies of the Commission rules of practice from the Administrative Code published by the secretary of state. The Code is on the secretary of state’s web site at www.azsos.gov/public_services/Title_14/14-03.htm
- A.R.S. §§ 41-1061 through 41-1067. Statutes found in the Arizona Administrative Procedures Act, which govern adjudicative proceedings. You may obtain copies of these statutes from the legislature's web site at www.azleg.state.az.us/ArizonaRevisedStatutes.asp?Title=41
Who you can talk to about your case. To avoid any prejudice or bias against you during the administrative process, the Corporation Commission has adopted a rule that prohibits any person from talking about the substantive issues of your case to a commissioner or a Commission administrative law judge outside the presence of all the parties to your case. That means you cannot talk to a commissioner or a Commission administrative law judge without an attorney from the Securities Division being involved in the conversation, unless you are talking only about procedural matters. This rule also applies to employees of the Securities Division. A.A.C. R14-3-113.
Contents of Notice. Read the Notice you received carefully. The Notice contains the activities in which the Securities Division alleges you have engaged that violate the Arizona Securities Act or the Investment Management Act. The Notice also tells you the time frame in which you must request a hearing, if you want one, and the time frame in which you must file an answer to the Notice. A.R.S. § 41-1061(B).
Opportunity for a hearing. You are entitled to a hearing, typically held by the Commission before an administrative law judge. At the hearing, you may call witnesses, present evidence, and testify on your own behalf. To get a hearing, you must request a hearing in writing within ten days after you have received the Notice. A.R.S. § 44-1972(D); § 44-3212(D); A.A.C. R14-4-306(C); A.R.S. § 41-1061(A).
Temporary cease and desist orders. If the Notice was served on you along with a temporary cease and desist order, you must request the hearing in writing within 20 days of service of the Notice and temporary cease and desist order. You must immediately cease conducting any activity alleged by the Securities Division to be in violation of the Arizona Securities Act or Investment Management Act, as described in the temporary cease and desist order. A.R.S. § 44-1972(C); § 44-3212(B); A.A.C. R14-4-307.
Serving and filing written documents in connection with your case. When you file your written request for a hearing, or any other document in connection with your case, you will file it with Docket Control. Contact Docket Control at 602-542-3477. Docket Control keeps the official record of your case. In addition to filing your documents with Docket Control, you must also “serve” all pleadings or motions on the Securities Division and any other parties in the case. To serve the Division, mail or deliver a copy of the pleading or motion to the Securities Division at 1300 West Washington, 3rd Floor, Phoenix, Arizona 85007, addressed to the attorney who is handling the case against you. A.A.C. R14-4-303(B); R14-3-102; R14-3-107; A.R.S. § 41-1061(E).
The date set for the hearing. If you request a hearing, the Hearing Division of the Corporation Commission will notify you of the date set for the hearing. By law, the hearing must be held no earlier than 20 days after you request a hearing, but no later than 60 days after your request. If you have received a temporary cease and desist order with your Notice, the date set for the hearing shall be within 30 days, but not earlier than ten days, after you request a hearing. The administrative law judge may schedule a prehearing conference to formulate or simplify the issues, organize the submission or exchange of evidence, and address other matters that may expedite the orderly conduct and disposition of your case. A.R.S. § 44-1972(E); § 44-3212(D); A.A.C. R14-4-307(D); R14-3-108.
Answering the Notice. If you request a hearing, you must file an answer to the Notice within 30 calendar days after the date of service of the Notice. In your answer, you should respond to each allegation made by the Securities Division. You should number your paragraphs so that the number of your answer corresponds to the paragraph number of the Securities Division’s allegation made in the Notice. You must admit or deny each allegation contained in the Notice. If you do not deny an allegation, the allegation is deemed admitted. Remember to file your answer with Docket Control and serve a copy on the Securities Division. A.A.C. R14-4-305.
If you fail to request a hearing. If you fail to request a hearing, you lose by default. The Corporation Commission may enter a final decision against you. A.R.S. § 41-1061(D).
Form of formal documents. All answers, motions, responses, replies, and other papers filed in connection with your case must be typewritten, properly captioned, and properly signed. A.A.C. R14-3-106.
Formal interviews. Prior to the hearing, a Securities Division attorney may examine you under oath. The Securities Division also may have examined you prior to serving you with the Notice. You may be represented by a lawyer at the examination. The examination will be recorded either mechanically or by a court reporter. You may not make a recording for yourself. You may request in writing an opportunity to examine the record of your testimony. A.A.C. R14-4-304.
Subpoenas. Both before and after the Securities Division has served you with a Notice, the Securities Division may investigate your conduct and gather evidence to use at a hearing. The Securities Division may have a subpoena issued that requires witnesses to testify or present evidence at the hearing. You may have a subpoena issued through the executive director of the Corporation Commission. Subpoena Forms.
Privilege against self-incrimination. You may not refuse to attend and testify or produce evidence on the ground that the testimony or evidence would tend to incriminate you unless you are entitled to the privilege under the fifth amendment of the constitution of the United States or article II, section 10, of the constitution of Arizona. A.R.S. § 41-1066.
Settlement. By law, you may agree to settle your case prior to the hearing. If you can reach an agreement with the Securities Division, you may enter into a consent order. The consent order must be approved by the Corporation Commission commissioners at an open meeting. A.R.S. § 41-1061(D).
Motions, responses, and replies. If you or the Securities Division files a motion requesting the administrative law judge to take some action in your case—such as resolving a dispute among the parties about evidence or procedures—the other party may respond to that motion within ten days, not counting weekends or holidays. Within five days after receiving the response (not counting weekends or holidays), the moving party may file a reply to the response. A.A.C. R14-3-106(K).
Conduct at the hearing. The hearing is held before an administrative law judge. You should conduct yourself in the same manner as required of you if you appear before an Arizona superior court. The technical rules of evidence are not applied as strictly during an administrative hearing as they are in a court. A record will be made of the hearing and will be filed with Docket Control. You may request a copy of the transcript of the hearing, at your own expense. A.R.S. § 44-1973; § 44-3213; A.A.C. R14-3-104; R14-3-109; A.R.S. § 41-1061(F); § 41-1062(A).
Order of the hearing. At the hearing, the Securities Division has the burden of proof and will first present its witnesses and evidence to support its allegations against you. You may cross-examine the witnesses of the Securities Division. When the Securities Division is through presenting its case to the administrative law judge, you may then present your witnesses and evidence to refute the allegations against you. If you are claiming an exemption from registration, you have the burden of proving you qualify for the exemption. The Securities Division will have the opportunity to cross-examine your witnesses. A.A.C. R14-3-109(G).
A decision about your case. After you have appeared and presented your case to the administrative law judge, the judge will submit a recommended opinion and order to the Corporation Commission commissioners. You will receive a copy of the recommended opinion and order. Within ten days of the date the recommended opinion and order was mailed to you, you may file objections to it in the form of “exceptions.” The commissioners will consider the recommended opinion and order and any filed exceptions and will make the final determination regarding your case at an open meeting. After a final opinion and order is entered into the record, a copy will be mailed to you. A.A.C. R14-3-110; A.R.S. § 41-1061(G); § 41-1063.
Rehearings. You may make an application to the Corporation Commission for another hearing if you file the application in writing within 20 calendar days after the entry of a decision or order in your case. The decision or order is effective as of the date it is entered, however, even if you ask for another hearing. You must comply with the decision or order. If the Commission does not grant you another hearing within 20 days after your request, your application is denied. A.R.S. § 44-1974; § 44-3214; A.A.C. R14-3-112; A.R.S. § 41-1062(B).
Appeals. You may appeal a final decision of the Corporation Commission pursuant to A.R.S. § 44-1981 or § 44-3231.
The information provided on this web site is not comprehensive, is not offered as legal advice, and is not a substitute for competent legal counsel. The Securities Division recommends that you consult with a securities attorney.