Re:      Jury Trials Before the Corporation Commission Securities Division Involving Civil Penalties 

We write seeking guidance and a formal opinion from the Attorney General relative to the right to a jury trial when a person is faced with civil penalties in securities cases imposed by the

Corporation Commission. We write only on our own behalf as elected officials. This is not a letter approved by the Commission as a whole nor is it an act of the Commission.

 As elected public officers, we make this request for a formal opinion pursuant to Arizona Revised Statutes (“A.R.S.”) § 41-193(A)(7).1 We also write to our legislative leadership, as more fully discussed below, as clarification from the Legislature may be appropriate as well.

Nothing in this request shall impair, reflect or impact any pending court proceeding2 where the generic issue of jury trials before the Commission may be raised. Our focus here is decidedly different and based on language in a statute no court has yet addressed.

1. The Importance of Trial By Jury

   At the outset we note that the right to a trial by jury is fundamental to our civil liberties. Indeed, our State Constitution holds the “the right of trial by jury shall remain inviolate.” Ariz. Const. art. 2, § 23.3 As elected officials, we support this Constitutional right in no uncertain terms. If the Commission is either obligated to, or if it is simply permitted to, enact jury trials in securities cases involving civil penalties, then we are interested in pursuing this.

   As discussed below, the statute imposing the right to seek civil penalties for securities fraud and other violations expressly preserves the right to a jury trial. This begs the question whether that right exists, however.

   As Commissioners we cannot make the law. We cannot mandate a jury trial if our Constitutional powers under Article 15 do not give us this right. This right has to come from State law, and the Commission must be directed by the legislature via statute, the courts via court decisions, or express terms in the Constitution.

   One court has concluded that “the Arizona Constitution vests the Commission with ‘the power and authority to enforce its rules, regulations, and orders by the imposition of such fines as it may deem just.” Ariz. Const. art. XV, § 19. EFG America, LLC v. Arizona Corporation Commission, 569 P.3d 806, 809 (App. 2025). We do not take this to mean we could enact a rule authorizing a jury trial in such cases, but that is precisely why we are seeking an opinion from the Attorney General.4

   The courts have explained that whether a jury trial is required today, in the absence of clear guidance, is to be determined whether the analogous crime or violation inured a jury trial pre- statehood:

   We have consistently held that the phrase “shall remain inviolate” preserves the right to jury trial as it existed at the time Arizona adopted its constitution. Benitez, 198 Ariz. at 93 ¶ 4, 7 P.3d at 102; Bowden, 26 Ariz. at 488, 226 P. at 550.2 Thus, our constitution requires that the state guarantee a right to jury trial for any defendant charged with an offense for which a jury trial was granted prior to statehood.5

    Under federal law, the U.S. Supreme Court held that a jury trial was indeed mandated for the same or similar misconduct we prosecute under state law:

    For respondents’ alleged fraud, the SEC seeks civil penalties, a form of monetary relief. While monetary relief can be legal or equitable, money damages are the prototypical common law remedy. See Mertens v. Hewitt Associates, 508 U.S. 248, 255, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993). What determines whether a monetary remedy is legal is if it is designed to punish or deter the wrongdoer, or, on the other hand, solely to “restore the status quo.” Tull, 481 U.S. at 422, 107 S.Ct.183. ***

   In sum, the civil penalties in this case are designed to punish and deter, not to compensate. They are therefore “a type of remedy at common law that could only be enforced in courts of law.” Ibid. That conclusion effectively decides that this suit implicates the Seventh Amendment right, and that a defendant would be entitled to a jury on these claims.6

   It is pertinent as well that the Legislature has instructed the Commission and the Courts that “It is the intent of the legislature in construing the [Arizona Securities Act] courts may use as a guide the interpretations given by the federal or other courts in construing substantially similar provisions in federal securities laws of the United States.” 1996 Ariz. SESS. Laws Ch. 197 § 11(c) (2nd N.D. reg. SESS); Private Securities Regulation, ch. 197, § 11(C), 1996 Ariz. Sess. Laws 1003, 1023. Thus, for the same conduct that can be prosecuted under federal law, a jury trial is required. However, Division 1 of the Arizona Court of Appeal, ruled differently under State law and concluded that “if our constitutional framers had intended to confer a jury-trial right for Commission enforcement actions, they would have done so.” EFG America, LLC, 569 P.3d at 810.7

    State law provides:

    A person who, in a civil proceeding, is found to have violated any provision of this chapter or any rule or order of the commission shall pay a civil penalty in an amount of not to exceed five thousand dollars for each violation. A.R.S. § 44-2037(A).

   Federal law provides:

   the Commission may impose a civil penalty on a person if the Commission finds, on the record, after notice and opportunity for hearing, that—

   (A)such person—(i)is violating or has violated any provision of this subchapter, or any rule or regulation issued under this subchapter….

   15 U.S.C.§ 77h-1(g). An additional civil penalty provision under federal law provides: the Commission or the appropriate regulatory agency may impose a civil penalty if it finds, on the record after notice and opportunity for hearing, that such penalty is in the public interest and that such person—(A) has willfully violated any provision of the Securities Act of 1933.

    15 U.S.C.§ 78u-2(a). Though worded differently, the purpose is identical: both the SEC and this Commission can impose civil fines or penalties for violation of our respective securities laws. Thus, these statutes are “substantially similar.”

    We have been advised by our Office of General Counsel that whether a jury trial is mandated for the imposition of civil penalties for securities fraud and related violations, remains unclear. Recognizing the cogency of the holding in EFG America, nevertheless whether securities fraud, pre-statehood, would have been afforded a jury trial, remains opaque: bucket shops,8 for example, were illegal, and punished as a crime with the right to a jury trial. See Territorial Law Chapter 37, Section 1 & 2 (1909) (“A sale or purchase or contract to sell or offer to sell or purchase any copper, gold, silver, lead, cotton, grain or meat, or any stocks or bonds of any corporation to be delivered in the future when it is not the bona fide intention of the party being prosecuted under this Act”), and today it is still a crime. A.R.S. § 44-1651 (“(a) A sale or purchase or contract to sell or offer to sell or purchase any … stocks or bonds of any corporation, to be delivered in the future when it is not the bona fide intention of the party being prosecuted, at the time the transaction was made, that the subject matter of the transaction should be delivered and paid for as specified in such transaction.”). Notably, under territorial law violation of the bucket shop act was “a misdemeanor” (Territorial Law Chapter 37, Section 3 (1909).

    More importantly, a jury trial was mandated, as the Territorial Legislature set forth the defenses to a bucket shop prosecution and directed the Court to instruct the jury on these defenses: “and the Court trying the case shall so charge the jury.” (Territorial Law Chapter 37, Section 8 (1909)).

    Pyramid schemes and Ponzi schemes,9 today punished by the Commission under A.R.S. § 44-1801 to § 44-2156 and a felony under A.R.S. § 44-1731.

   Similarly, Arizona courts have ruled that “theft” (which includes larceny, embezzlement and false pretenses) were misdemeanors at common law in the Territory of Arizona, but were afforded jury trials:

   Finally, as the superior court noted, Arizona has “always” allowed jury trials for misdemeanor theft, and the State has not challenged that assertion. See Derendal, 209 Ariz. at 419, ¶ 9, 104 P.3d at 150 (“[O]ur constitution requires that the state guarantee a right to jury trial for any defendant charged with an offense for which a jury trial was granted prior to statehood.”).

    Nor does the State argue that theft, as a single crime, cannot be jury-eligible. At oral argument in the superior court, the State acknowledged that “some” of the subsections of A.R.S. § 13–1802 could have substantially similar elements to a common-law crime. … Notwithstanding the positions urged by the State and the amicus that theft of services has no common-law antecedent, over more than a century, no Arizona appellate court has held that a person charged with any variety of larceny or theft, in all degrees, is ineligible for a jury trial. And the only authority we have found indicates to the contrary. See State v. Paramo, 92 Ariz. 290, 293–94, 376 P.2d 554 (1962) (affirming conviction for petty theft after trial to a jury).10

    The securities statutes we enforce, including that which allows us to impose civil penalties, are at base anti-theft by false pretense statutes. This is akin as well to the common law crime of “larceny by trick” for which a jury trial was afforded.11 The reparation orders, disgorgement orders, and civil penalty orders we routinely implement involve the underlying theft of investor’s property (their money) by beguile, false representations, and outright lying.

   Put simply: “The Arizona Criminal Code Commission noted ‘[t]he essence of theft ... is the obtaining of unlawful control over property of another  For all practical purposes, the verbal

   distinctions among embezzlement, receiving stolen property, finding and keeping lost property, defrauding an innkeeper and similar theft offenses are abolished and replaced by a singular concept of depriving another of his or her property or services.”12

   Such theft, that is, unlawfully or by trick depriving another of his or her property, is what the Arizona securities laws seek to prevent. See A.R.S. § 44-1997 (prohibiting any “untrue statement of a material fact or omitted to state a material fact required to be stated or necessary to make the statement not misleading” in a securities registration statement).

   Violation of the state’s securities laws, which we enforce, are all class 1 misdemeanors today, and thus punishable by potential jail time. A.R.S. § 44-2040 (“A person who knowingly violates any provision of this chapter or any rule, regulation or order of the commission thereunder for which a penalty is not provided is guilty of a class 1 misdemeanor”). This may be punished with six months in jail. A.R.S. § 13-707(A)(1) (“For a class 1 misdemeanor, six months”).13

   Obtaining someone’s money by “false pretenses” was a crime in territorial Arizona, and it did warrant a jury trial. Today, Federal securities law expressly defines securities fraud as “selling a security by using false or fraudulent pretenses, representations or promises.” (18 USC Sec. 1348). Our securities law also uses false pretenses as a crime when selling securities: “Any person who, pursuant to a scheme or artifice to defraud, knowingly obtains any benefit by means of false or fraudulent pretenses, representations, promises or material omissions is guilty of a class felony.”

   A.R.S. § 13-2310(A). While we do not initiate actions under Title 13, our point here is that it appears to us the actions we do regulate are potentially criminal, and analogous actions in Territorial Arizona were punished but with a trial by jury.

   Further, “Actions by the Government to recover civil penalties under statutory provisions therefore historically have been viewed as one type of action in debt requiring trial by jury”. Tull v. United States, 481 U.S. 412, 418-19 (1987). The court in Standard Chartered v. Price Waterhouse, at N. 6 (Ariz. App. 1997), noted that “the Securities Act arms the Attorney General and Corporation Commission with a range of public enforcement measures against ‘any person’ engaging in a violation of the Act. See, e.g., A.R.S. § 44-2032; see also A.R.S. §§ 44-2036, 44- 2037.”).

   We note this history simply to share our concern that jury trials may in fact be necessary under our State Constitution, much like the Supreme Court ruled they were under the Federal Constitution in Jarkesy. But we cannot make this determination from our role as Commissioners. Relative to securities, state law allows us to “make, amend and rescind rules and regulations reasonably necessary to carry out the provisions of this chapter.” A.R.S. § 44-1821(B). We do not see this as authorization to create a right to a jury trial, but this is in part why we seek an opinion from the Attorney General.14

2. The Issue:    Is There A Constitutional, or Statutory Right To A Jury Trial In Securities Cases Where Civil Penalties Are or Could Be Imposed?

    In our capacity as Commissioners, we are frequently presented with recommended orders involving securities violations. The Legislature put the Commission in charge of securities regulation. The Commission may impose civil penalties “in an amount of not to exceed five thousand dollars for each violation.” A.R.S. § 44-2037(A). The statute further provides:

   Nothing in this section shall be construed to limit the right of a party in an action under this section to a trial by jury.

   A.R.S. § 44-2037. The highlighted section of this statute gives us pause. The language suggests that the Legislature recognized a jury trial right in civil penalty proceedings, otherwise, why warn the Commission and the Courts not to construe this section to “limit the right of a party… to a trial by jury”? No court has addressed this aspect of the statute. We do know that our Supreme Court has ruled that the Securities Act should be interpreted to implement legislative intent. Sell v. Gama, 231 Ariz. 323, 327 (Ariz. 2013) (“Our goal in interpreting statutes is to give effect to the intent of the legislature.”).

    Notably, the Arizona Supreme Court held that it will construe the Arizona’s Security Act “by following” the federal act unless there is a substantial difference:

    we will interpret the ASA by following settled federal securities law unless there is a good reason to depart from that authority. Gunnison, 127 Ariz. at 112–13, 618 P.2d at 606–07. This approach is consistent with the legislature's intent, as expressed in 1996, regarding judicial interpretation of the ASA. 1996 Ariz. Sess. Laws, ch. 197, § 11(C) (2nd Reg. Sess.) (“It is the intent of the legislature that in construing the [ASA], the courts may use as a guide the interpretations given by the ... federal or other courts in construing substantially similar provisions in the federal securities laws of the United States.”).15

   In this regard, should we on the Commission also look to federal precedent to guide us, which is Jarkesy relative to jury trials? Certainly, the Legislature has indicated we should. The civil penalty provision under federal law is not materially different from the state law.

    In 2003, Rep. Carpenter provided the following analysis relative to the Commission when transmitting amendments to A.R.S. § 44-2037: 

   The Securities Division within the Arizona Corporation Commission (ACC) is charged with managing the securities industry and administering the Arizona Securities and Investment Management Acts. These acts protect the public from fraudulent practices in the sale or purchase of securities. The proposed legislation confirms that the commission has the authority to conduct private or public investigations and to require nondisclosure of subpoenas issued in relation to an investigation. The legislation also incorporates changes made in Laws 2002 (Chapter 157) that authorized the use of commission attorneys to represent the commission in private civil actions.

   Transmittal to Governor, HB 2159 (2003), added by Laws 1986, Ch. 220, § 7.

    Nevertheless, we as Commissioners (who also act as judges) lack express guidance. Are we to assume there is a jury trial right since the Legislature clearly did not want us to “limit” that right? Or, is this merely surplusage? Or, is it contingent on whether a right is first determined?

   Ask 1: We seek an opinion from the Attorney General on the application of this statute to our proceedings involving civil penalties and whether, in light of the territorial laws punishing false representations in the sales of securities, and the right to a jury trial in that regard under Territorial law, the Commission is today obligated to provide jury trials relative to civil penalties for this conduct.

   Ask 2: We further seek clarification whether the Constitutional authority granted to the Commission under Ariz. Const. art. XV, § 19 and which Division One noted that “the Arizona Constitution vests the Commission with ‘the power and authority to enforce its rules, regulations, and orders by the imposition of such fines as it may deem just,” creates the power to enact a rule providing for jury trials in civil penalty cases?

   Ask 3: Does the Legislative statute A.R.S. § 44-2037, that provides “Nothing in this section shall be construed to limit the right of a party in an action under this section to a trial by jury” indicate the Legislature believed a jury trial right existed and should not be limited?

   Ask 4: How prominent in our application of our state law should the 1996 legislative direction to use federal SEC and federal court decisions as guidance (“It is the intent of the legislature in construing the [Arizona Securities Act] courts may use as a guide the interpretations given by the federal or other courts”) be where the purposes of the statutes are identical?

   Protecting Arizona investors is a critical task and we take it seriously. Investors should know that they are investing in a state where the rule of law will protect them and punish those that commit any form of securities fraud. But we are cognizant that defendants have rights and should be treated with fairness and dignity.

   We ask that the Attorney General be mindful of the public’s right to due process and fairness in responding to our inquiry. As regulators and judges, we strive to uphold all aspects of due process and fairness in our Commission proceedings.

3. If There Is No Legal Mandate for Jury Trials, Should the Legislature Create That Right?

The leaders of the Arizona Legislature are included in this request in that, as the body responsible for establishing policy in this state, it can, and perhaps should, look at this jury trial issue, look at the Supreme Court’s ruling in Jarkesy, and if it deems important, enact a clear, and unambiguous statute allowing for jury trials for Commission cases involving civil penalties.16 Guidance from the Legislature would also be welcome.

We thank the Attorney General and the Legislative leaders for considering this matter and assisting us in ensuring the rights of the public are preserved and due process is afforded to all those who appear before the Commission.

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1 - This provision provides in relevant part: “On demand by the legislature, either house of the legislature or any member of the legislature, any public officer of this state or a county attorney, render a written opinion on any question of law relating to their offices.” Commissioners are “public officers” as defined in A.R.S. § 38-101(3) and are “officers” required to take an oath of office under A.R.S. § 38-231.

2 - Pending before the Arizona Supreme Court is a petition for review by Cellebration Life Sciences, CV-25-0212-PR. Nothing in this letter shall detract from any arguments asserted in that litigation. There has been a heighted interest in this general issue post Jarkesy. Commission Decision No. 81447, Docket #23-0233 (Darrien Bonney's comments at the August open meeting); In the Matter of Cornerstone Wealth Management LLC Decision 81352 p. 44-47 (June 18, 2024); Cellebration Life Sciences v. Ariz. Corp. Comm. Docket #s CA-SA 24-0236, S-24-0079.

3  - “Section 23. The right of trial by jury shall remain inviolate. Juries in criminal cases in which a sentence of death or imprisonment for thirty years or more is authorized by law shall consist of twelve persons. In all criminal cases the unanimous consent of the jurors shall be necessary to render a verdict. In all other cases, the number of jurors, not less than six, and the number required to render a verdict, shall be specified by law.”

4 - “The Arizona Legislature began to regulate the issuance and sale of securities in 1913.” “K. DeLarosa, “Recent Changes in Arizona Securities Regulation” (2003).

5  - Derendal v. Griffith, 209 Ariz. 416 , 419 Ariz. 2005).

6 - SEC v. Jarkesy, 603 U.S. 109, 124-125 (U.S. 2024). The 7th Amendment right to jury trials is not incorporated to the States, thus Jarkesy cannot force Arizona to change its precedent. EFG Am., LLC v. Arizona Corp. Comm'n, 569 P.3d 806 ¶¶8-13 (App. 2025); Peterson v. Arizona Corp. Comm'n, 1 CA-CV 23-0253, 2024 WL 1167387 ¶10 (App. Mar. 19, 2024)(discussing that Jarkesy only considers federal securities law). Thus, the resolution of this issue is purely a matter of state Constitutional law and legislative enactments.

7  - It is notable that it is a class 4 felony for a public service corporation to issue stock “contrary to law” (or contrary to commission orders). A.R.S. § 40-303(C).

8 - A bucket shop was an operation where futures were sold, including stocks or bonds of corporations, in speculative ways usually involving false representations. It amounted to gambling more than investing, where people “bet” on whether a stock would rise or fall. Modern day boiler rooms are the descendant of bucket shops. Federal securities law also criminalizes bucket shops: 7 U.S.C. § 6b ("It shall be unlawful to bucket an order …”).

9 - The territory prosecuted anti-trust violations, and they were tried by a jury. Tribolet v. U.S., (Terr. Ariz. 1908) 11 Ariz. 436, 445; 95 P. 85. But, this was prosecuted under statute (the Sherman Anti-Trust Act) , not common law. The Arizona Supreme Court ruled in Miller v. Thompson, 26 Ariz. 603; 229 P. 696 (Ariz. 1924), that jury trials for equitable claims were not mandated pre-statehood.

10 - State v. Kalauli, 243 Ariz. 521, 526-527 (App. 2018) (emphases added).

11 - Id. at n. 4.

12 - Id. at n. 5.

13 - The courts have ruled that the Commission’s ability to regulate corporations, securities and shareholder rights is limited to domestic corporations and domestic shareholders, and the Commission’s reach does not extend past the Arizona borders. ACC v. Media Products, No. 1 CA-CIV 9655, ¶ 72,749 (Ariz. App. 1988) (finding the Commission’s efforts to regulate shareholder rights for a non-domestic corporation to violate the federal Constitution and thus “We conclude that the Act, as applied in this case, constitutes a direct burden upon interstate commerce”). Civil penalties were sought in that case, but the court did not address it.

14 - We do not necessarily agree with the North American Securities Administrators Association argument, in its Amicus brief before Division 1, that a jury trial on civil penalties would harm our ability to enforce the securities laws or harm investors. The decision to seek, and obtain civil penalties, does not impact defrauded investors since the monies recovered as penalties get paid to the Arizona general fund—not investors. The civil penalties aspect is distinct from restitution or disgorgement of ill-gotten gains which do go to the investors.

15 - Sell, 231 Ariz. at 327.

16 - The Arizona courts will presume that the legislature did not intend for a jury trial for misdemeanors unless the legislature expressly says so by statute: “ [W]hen the legislature classifies an offense as a misdemeanor and punishable by no more than six months incarceration, we will presume that offense to be a petty offense that falls outside the jury requirement.” Fushek v. State, 218 Ariz. 285, 288 (Ariz. 2008).