Ashton v. Department of Commerce , 2019 UT App 170 ( 2019 )

2019 UT App 170THE UTAH COURT OF APPEALS
STEPHEN ABRAHAM ASHTON AND
ONE FOR THE MONEY FINANCIAL INC.,
Petitioners,
v.
DEPARTMENT OF COMMERCE AND SECURITIES COMMISSION,
Respondents.
Opinion
No. 20180510-CA
Filed October 18, 2019
Original Proceeding in this Court
Stephen K. Christiansen, Attorney for Petitioners
Sean D. Reyes and Erin T. Middleton, Attorneys for
Respondents
JUDGE DAVID N. MORTENSEN authored this Opinion, in which
JUDGES KATE APPLEBY and DIANA HAGEN concurred.
MORTENSEN, Judge:
¶1 Stephen Abraham Ashton—an individual unlicensed to
act as an investment adviser in the state of Utah—acted as an
investment adviser in the state of Utah. Consequently, Ashton
was investigated by the Division of Securities (Division) and
fined $250,000 by the Utah Securities Commission
(Commission). A portion of Ashton’s fine was also attributable
to Ashton’s interference with the Division’s investigation.
Ashton filed a request for agency review and the executive
director of the Department of Commerce (Department) affirmed
the Commission’s fine. Ashton seeks judicial review and asks us
to conclude that because he was paid by financial institutions
rather than his clients—to whom he gave “free” advice—he was
not required to obtain a securities license. We decline to disturb
the Department’s conclusion related to licensure. However,
Ashton v. Department of Commerce
because the Department erroneously concluded that Ashton’s
interference with the Division’s investigation violated section 61-
1-19 of the Utah Uniform Securities Act (Act) we vacate the
entire fine and return the case to the agency to recalculate the
fine amount consistent with this opinion.
BACKGROUND 1
¶2 Ashton is an insurance agent who owned and operated
One for the Money Financial Inc. in St. George, Utah. Despite not
being licensed as an investment adviser, the articles of
incorporation for Ashton’s company declared that its purpose
was to “provide financial planning services.” One for the
Money’s website also advertised that it offered “information,
education, advice and planning services,” and it included a
testimonial from a client who was “pleased with the advice and
efficient handling of our 401k money.”
¶3 Ashton also advertised on a variety of mediums holding
himself out as “knowledgeable and able to provide a broad
range of investment and financial services,” including reviewing
investment portfolios, 401(k), and retirement accounts. For
example, Ashton advertised on his LinkedIn profile that he was
“[r]ecognized as one of the top retirement experts in the nation,”
had helped “thousands of individuals” prepare for a “secure
retirement,” and had a background in “traditional financial
planning.”
¶4 Ashton also co-hosted a weekly radio program titled
“Retirement Brothers” with his brother, who also worked for
1. Ashton did not challenge the factual findings made by the
Commission and adopted by the Department on agency review.
We accordingly recite the facts consistent with the Department’s
findings as set forth in its decision. Nelson v. City of Orem, 2013
UT 53, ¶ 3 n.1, 309 P.3d 237.
20180510-CA 2 2019 UT App 170Ashton v. Department of Commerce
One for the Money. 2 There, Ashton advertised that he could
review listeners’ IRA, 401(k), and other retirement accounts that
were invested in securities.
¶5 Ashton gave “free” seminars and consultations in which
he discussed liquidating various securities products, including
stocks, bonds, and mutual funds, in order to purchase variable
annuities—an insurance product. Ashton went on to compare
securities to a roller coaster, a casino, or a poker game, but he
described purchasing annuities as a “safe” retirement strategy.
He also offered to conduct “free” consultations to review clients’
portfolios. At least one of Ashton’s presentation slides stated,
“Tax-Free IRA or 401k Rollovers—It is very common for
individuals to rollover their IRAs and 401ks into a safe, Fixed
Indexed Annuity.”
¶6 In other words, Ashton’s “free” seminar had a grander
purpose: offer negative advice on securities in order to sell
annuities—which are not considered a security, see Utah Code
Ann. § 61-1-13(1)(ee)(ii)(A) (LexisNexis 2018) 3—for a
commission. After giving the “free” seminars to prospective
clients, Ashton offered a “free” consultation where he urged his
actual clients to sell or rollover their securities to purchase
annuities. Indeed, Ashton advertised that at any time he had
“over $3.5 million in personal annuity premium production
pending” and that the “[s]eminars generate[d] close to 50% of
[his] total revenue every year.”
¶7 Ashton also kept a digital file that tracked his clients. The
notes in that file contained multiple references to discussions
2. The Division also investigated Ashton’s brother, and he
stipulated to pay a fine.
3. Because the statutory provision in effect at the relevant time
does not differ in any material way from the provision now in
effect, we cite the current version of the Utah Code.
20180510-CA 3 2019 UT App 170Ashton v. Department of Commerce
with actual clients about IRA rollovers and Roth IRA
conversions to facilitate the purchase of annuities. The notes
further revealed that clients did indeed liquidate their securities
accounts to purchase annuities. Ashton admitted that this
happened many times.
¶8 In 2014, the Division opened an investigation into Ashton.
Early on, the Division noticed that certain information
was missing from files that Ashton had turned over.
The Division issued a subpoena requesting the missing
documents, but Ashton declined to produce them. After
the Division filed an order to show cause requesting that a
court compel Ashton to produce the missing documents,
he agreed to give the Division “full access” to his client files,
emails, and other information. But Ashton still did not disclose
all of his documents. Although the Division obtained some
of the missing documents from third parties, Ashton continued
to refuse to turn over his complete files.
¶9 The Division issued a notice of agency action and order
to show cause, alleging that Ashton was holding himself out as
an investment adviser without a license in violation of the Act,
see id. § 61-1-3, and the Department of Commerce Administrative
Rules, see Utah Admin. Code R164-4-2(G)(3).
¶10 After a hearing, the Commission entered an order
stating that “[Ashton is] ordered to cease and desist from
committing or causing any violations, or future violations of
Section 61-1-3(4)(a)(i) of the Utah Securities Act and the Rules
promulgated thereunder, including but not limited to, Utah
Admin Code Rule 164-4-2(G)(3).” The Commission further
determined that Ashton violated section 61-1-19 of the Act in
connection with his interference with the Division’s
investigation. The Commission fined him $250,000 for these
violations. Ashton requested an agency review with the
Department, and after its review, the Department affirmed the
Commission’s order.
20180510-CA 4 2019 UT App 170Ashton v. Department of Commerce
¶11 Ashton petitions for judicial review of the Department’s
order.
ISSUES AND STANDARDS OF REVIEW
¶12 Ashton raises two issues for our review. The first is
whether the Department erred in fining Ashton for holding
himself out as an investment adviser without a license. The
second is whether the Department erred in ruling that Ashton
violated section 61-1-19 of the Act by interfering with the
Division’s investigation. These issues raise questions of statutory
interpretation, which we review for correctness. Marion Energy,
Inc. v. KFJ Ranch P’ship, 2011 UT 50, ¶ 12, 267 P.3d 863.
ANALYSIS
I. Licensure
¶13 We decline to reach Ashton’s first issue—whether he
violated the Act—because he failed to challenge the
Department’s conclusion that he also violated rule R164-4-
2(G)(3)(c) of the Utah Administrative Code. Accordingly, we
decline to disturb the Commission’s conclusion—as it relates to
licensure—on that ground. See Simmons Media Group, LLC v.
Waykar, LLC, 2014 UT App 145, ¶ 32, 335 P.3d 885 (“This court
will not reverse a ruling . . . that rests on independent alternative
grounds where the [petitioner] challenges only one of those
grounds.” (cleaned up)).
¶14 The Commission was authorized to fine Ashton for
violating rule R164-4-2. The Act authorizes the Division to
“make, amend, or rescind a rule . . . when necessary to carry out
this chapter.” Utah Code Ann. § 61-1-24(1)(a) (LexisNexis 2018).
Further, the Act authorizes the Department to impose fines, id.
§ 61-1-20(1)(e)(ii), and/or “a combination of sanctions,” id. § 61-1-
20(1)(e)(vii), “[w]henever it appears to the [Department] that a
20180510-CA 5 2019 UT App 170Ashton v. Department of Commerce
person has engaged, is engaging, or is about to engage in an act
or practice constituting a violation of this chapter or a rule or
order under this chapter,” id. § 61-1-20(1) (emphasis added).
Here, the Commission fined Ashton for violating the Act and a
related rule.
¶15 Rule R164-4-2(G)(3)(c) of the Utah Administrative Code
provides, “An insurance agent who, receives a commission from
the sale of insurance to a client who makes such purchase with
the proceeds of securities the insurance agent recommended be
sold, must be licensed as an investment adviser or investment
adviser representative.” Here, the Commission expressly
premised Ashton’s fine on violations of the Act and the
administrative rule. And the Department affirmed the
Commission on those same grounds. While Ashton argues that
he did not violate the Act, he is silent as to his violation of the
rule. Indeed, Ashton’s brief did not even cite rule R164-4-
2(G)(3)(c). Accordingly, where Ashton has not challenged the
Department’s conclusion that he violated rule R164-4-2(G)(3)(c),
and where that violation serves as a sufficient, independent
ground for fines or sanctions as related to licensure, we decline
to disturb the Department’s conclusion on this issue.
II. Investigation Interference
¶16 Next, Ashton argues it was error to determine that he
violated section 61-1-19 of the Act. Because section 61-1-19 grants
only investigatory authority to the Division, and does not apply
to third parties—such as Ashton—the Commission cannot levy
fines on a third party for violating this section.
¶17 Section 61-1-19 of the Act, under the heading
“Investigations authorized,” provides,
(1)(a) The division may make any public or private
investigations within or without this state as the
division considers necessary to determine whether
a person has violated, is violating, or is about to
20180510-CA 6 2019 UT App 170Ashton v. Department of Commerce
violate this chapter or a rule or order issued under
this chapter.
(b) To aid in the enforcement of this chapter or
in the prescribing of rules and forms issued
under this chapter, the division may require
or permit a person to file a statement in
writing, under oath or otherwise as to all the
facts and circumstances concerning the
matter to be investigated.
(c) The division may publish information
concerning a violation of this chapter or the
violation of a rule or order issued under this
chapter.
(2) For the purpose of an investigation or
proceeding under this chapter, the division, the
commission, or an employee designated by the
division may:
(a) administer an oath or affirmation;
(b) subpoena a witness and compel the
attendance of the witness;
(c) take evidence; and
(d) require the production of any books, papers,
correspondence, memoranda, agreements,
or other documents or records relevant or
material to the investigation.
Utah Code Ann. § 61-1-19 (LexisNexis 2018). Section 61-1-19
provides no mechanism to fine or sanction an investigated party
for noncompliance with an ongoing investigation. 4 The language
used in this section is not directed at private actors such as
Ashton, rather it is aimed at the Division itself. Indeed, “the
4. We note that other remedies such as contempt power, see, e.g.,
Utah Code Ann. § 78B-6-313 (LexisNexis 2018), or other sections
of the Act may provide that authority.
20180510-CA 7 2019 UT App 170Ashton v. Department of Commerce
division” is the subject of every sentence in section 61-1-19,
which merely articulates what actions the Division may take in
conducting investigations.
¶18 Accordingly, where section 61-1-19 of the Act provides no
statutory authority to issue fines or sanctions, the Commission
erred in concluding otherwise. And neither the Commission nor
the Department separately delineated what portion of Ashton’s
fine was attributable to investigative interference. Consequently,
we vacate the entire fine and return the matter to the agency to
revisit the amount of the fine independent of any perceived
violation of section 61-1-19.
CONCLUSION
¶19 Because Ashton did not challenge the Department’s
conclusion that he violated administrative rule R164-4-2—which
serves as an independent ground for Ashton’s fine—we decline
to disturb the Department’s conclusion on licensure. However,
because section 61-1-19 of the Act does not authorize the
imposition of fines or sanctions, and because the Department did
not specify which portion of Ashton’s fine related to section 61-
1-19, we vacate the entire fine and return the matter to the
agency to further consider the fine amount independent of any
perceived violation of that section.
20180510-CA 8 2019 UT App 170