23CA2061 Matter of Clark Brothers 10-24-2024
COLORADO COURT OF APPEALS
Court of Appeals No. 23CA2061 Colorado Division of Securities Case No. XY 2022-0001
In the Matter of Jason Ray Clark,
Respondent-Appellant,
v.
Tung Chan, Securities Commissioner,
Petitioner-Appellee.
ORDER AFFIRMED
Division IV Opinion by JUDGE KUHN Harris and Yun, JJ., concur
NOT PUBLISHED PURSUANT TO C.A.R. 35(e) Announced October 24, 2024
Jason Ray Clark, Pro se
Philip J. Weiser, Attorney General, Robert W. Finke, First Assistant Attorney General, Sarah P.J. Donahue, Assistant Attorney General, Denver, Colorado, for Petitioner-Appellee ¶1 In this securities license revocation action, respondent, Jason
Ray Clark, pro se, appeals the Colorado Securities Commissioner’s
final agency order revoking his investment advisor representative
license. We affirm.
I. Background
¶2 This matter stems from an investigation by the Colorado
Division of Securities into Clark and his investment advisor
company, Clark Brothers, Inc.1 The Division conducted two
examinations, the first of which occurred in February 2010. At the
conclusion of the first examination, the Division sent Clark a letter
informing him of regulatory deficiencies. Clark did not respond to
that letter, and in September 2010, the Division sent him a second
letter. In February 2013, the Division closed the first examination
after Clark agreed to comply with the Colorado Securities Act,
sections 11-51-401 to -412, C.R.S. 2024, and the securities rules
promulgated thereunder.
1 Clark Brothers, Inc., was previously a party to this appeal;
however, it was dismissed after failing to show why it is excepted from the requirement that a domestic entity be represented by an attorney in court proceedings. See § 13-1-127, C.R.S. 2024. Thus, this appeal relates solely to Jason Ray Clark.
1 ¶3 However, Clark did not comply with these requirements. He
did not file his required investment advisor forms (ADVs) for the
years 2014, 2015, 2016, 2017, and 2018. See Div. of Sec. Rule
51-4.3(IA)(G), 3 Code Colo. Regs. 704-1. The Division eventually
conducted a second examination in April 2021. After completing
the second examination, the Division alleged that Clark failed to
disclose or misrepresented material facts to clients in Form ADV
filings, including
• multiple tax liens and judgments entered against him;
• discretionary trading practices without first obtaining the
required client approval;
• concentrated positions with minimal diversification in
contradiction to his disclosed trading strategy;
• advisory fee calculations that differed from those
disclosed to investors; and
• the failure to correct misleading advertising and
performance claims.
¶4 The Division then filed a notice of charges containing the
above allegations. An Administrative Law Judge (ALJ) held a
two-day hearing on the merits in June 2023. The ALJ concluded
2 that Clark willfully violated the following Division of Securities
Rules: 51-4.3(IA)(F) and (G), 51-4.4(IA)(D), 51-4.6(IA)(A)(5) and
(E)(1), 51-4.6(IA)(A)(6), 51-4.6(IA)(A)(15), 51-4.6(IA)(A)(9),
51-4.6(IA)(A)(16), 51-4.6(IA)(A)(18), 51-4.8(IA)(A), 51-4.8(IA)(B),
51-4.8(IA)(J), 51-4.8(IA)(M), 51-4.8(IA)(N), 51-4.8(IA)(P),
51-4.8(IA)(X), 51-4.10(IA)(B)(2)(b)(i) and (ii), and 51-4.12(IA)(A)(6),
3 Code Colo. Regs. 704-1. The ALJ then issued an initial decision
revoking Clark’s investment adviser representative license.
¶5 Clark filed exceptions to the ALJ’s initial decision. After
reviewing the exceptions, the Commissioner affirmed and adopted
the initial decision and revoked Clark’s license.
II. Analysis
¶6 Clark raises multiple contentions that we address in turn. He
argues that the Commissioner’s license revocation order should be
reversed because (1) he was selectively prosecuted; (2) the ALJ
lacked constitutional decision-making authority; and (3) the
3 Commissioner’s decision was in error.2 We first address
preservation.
A. Preservation
¶7 As an initial matter, the Commissioner contends that the
majority of Clark’s issues are not preserved for review.3 We
disagree.
¶8 “To preserve an issue for appeal, all that is necessary is that
the issue ‘be brought to the attention of the [lower body] and that
the [decision-maker] be given an opportunity to rule on it.’” Dill v.
Rembrandt Grp., Inc., 2020 COA 69, ¶ 24 (quoting Berra v. Springer
& Steinberg, P.C., 251 P.3d 567, 570 (Colo. App. 2010)). “We do not
require that parties use ‘talismanic language’ to preserve particular
arguments for appeal.” People v. Melendez, 102 P.3d 315, 322
2 Clark’s last contention challenges the Commissioner’s ultimate
conclusions and findings on the grounds that (1) he cured all of the challenged deficiencies; (2) he did not willfully violate any Colorado securities statute; and (3) there was no harm to the public. These subparts are all a challenge to the merits of the Commissioner’s decision, and thus we address them together.
3 We note that Clark failed to include a statement of preservation for
his issues. However, we have “an independent, affirmative duty to determine whether a claim is preserved.” People v. Tallent, 2021 CO 68, ¶ 11.
4 (Colo. 2004) (quoting People v. Syrie, 101 P.3d 219, 223 n.7 (Colo.
2004)).
¶9 The Commissioner first argues that Clark failed to allege
specific instances of prosecutorial misconduct, citing Lanphier v.
Department of Public Health & Environment, 179 P.3d 148, 151-52
(Colo. App. 2007) (confirming the need for specificity in exceptions).4
The Commissioner’s argument is misplaced.
¶ 10 We agree that exceptions must specifically mention the ruling
that a party contends is erroneous. See Colo. State Bd. of Med.
Exam’rs v. Thompson, 944 P.2d 547, 550 (Colo. App. 1996) (“[S]ince
these exceptions did not mention the ALJ’s ruling on respondent’s
motion for a continuance, we conclude that he has waived any
contention of error in the denial of the request for continuance.”);
see also Lanphier, 179 P.3d at 152.
¶ 11 However, Clark’s selective prosecution contentions do not
challenge a specific ALJ ruling. Instead, they generally challenge
the Division’s choice to seek enforcement against him at all. Clark
4 We presume that the Commissioner meant selective prosecution,
as Clark does not bring a prosecutorial misconduct claim.
5 preserved this issue for review by raising it to the Commissioner in
his exceptions.5 See Dill, ¶ 24.
¶ 12 Turning to Clark’s constitutional argument, the Division
admits that he raised this issue in his exceptions. Even if that
weren’t the case, an ALJ may not rule on the constitutionality of the
agency’s enabling statutes. Colo. Dep’t of Pub. Health & Env’t v.
Bethell, 60 P.3d 779, 785 (Colo. App. 2002). Thus, we conclude
Clark’s constitutional contention is also preserved for review. See
Dill, ¶ 24.
¶ 13 For Clark’s third contention, the Commissioner argues that
Clark did not dispute the ALJ’s finding of willfulness on four
specific rules and failed to challenge the other rule violations with
specificity. We agree that Clark did not specifically list the rules
that he challenges. However, we also recognize that he is a pro se
litigant and that “[p]leadings by pro se litigants must be broadly
construed to ensure that they are not denied review of important
issues because of their inability to articulate their argument like a
5 To the extent that the Commissioner argues that Clark’s selective
prosecution claims are not detailed or supported by the record, those arguments go to the merits, not preservation.
6 lawyer.” Johnson v. McGrath, 2024 COA 5, ¶ 10 (quoting Jones v.
Williams, 2019 CO 61, ¶ 5).
¶ 14 Construing Clark’s exceptions broadly, he challenged all of the
ALJ’s findings that he acted willfully. He raised this issue before
the Commissioner, giving her the opportunity to review it. This was
sufficient to preserve his claim for review. See Dill, ¶ 24.
¶ 15 The Commissioner admits that Clark preserved his remaining
arguments, and we agree.
B. Selective Prosecution
¶ 16 Clark contends that he was subject to selective prosecution
and argues that, as a result, his securities license should be
restored. We disagree.
¶ 17 Selective prosecution is an equal protection claim. Equal
protection, in this context, requires “that a decision to prosecute
not be based on ‘an unjustifiable standard such as race, religion, or
other arbitrary classification.’” People in Interest of T.B., 2016 COA
151M, ¶ 66 (quoting United States v. Armstrong, 517 U.S. 456,
464-65, (1996)), aff’d, 2019 CO 53. “A selective-prosecution claim
is not a defense on the merits to the . . . charge itself, but an
independent assertion that the prosecutor has brought the charge
7 for reasons forbidden by the Constitution.” Armstrong, 517 U.S. at
463.6
¶ 18 Clark argues that he was singled out compared to other
investment advisors and that this matter was brought as retaliation
after he “sued the CDS, SEC, FINRA, CO AG, Schwab, Charles
Schwab himself, and all the Board of Directors of Schwab.”7
Because of this, he argues that his license should be restored. But
this is not enough to prevail on his claim. As noted, a selective
prosecution claim is not a defense to the charged conduct; instead,
it is a separate assertion that the charged conduct has been
brought in violation of “the equal protection component of the Due
Process Clause of the Fifth Amendment.” Id. at 464. To prevail,
Clark would have to present clear evidence that the prosecution had
6 We note that Clark does not provide a standard of review and the
Commissioner — applying criminal prosecutorial misconduct law — argues that a plain error standard should apply. However, Clark has not brought a prosecutorial misconduct claim, so the Commissioner’s argument is misplaced. Regardless, we do not need to determine the ultimate standard of review in this matter as Clark’s contention fails under any standard.
7 We note that Clark does not further identify the parties to the
lawsuit or explain when it occurred, the outcome, the case number, or what court it occurred in.
8 a discriminatory effect and was motivated by a discriminatory
purpose. See T.B., ¶ 66.
¶ 19 Clark does not pass this test. He does not assert that he has a
protected status, that the license revocation had a discriminatory
effect, or that the license revocation was undertaken with a
discriminatory intent. And he does not point to anything else in the
record demonstrating an equal protection violation. Even
construing his briefing broadly, Clark does not make a colorable
claim of selective prosecution; instead, he simply asserts that it
occurred with no legal or factual support.
¶ 20 Thus, we conclude that Clark has not demonstrated selective
prosecution in the license revocation proceedings.8
C. Decision-Making Authority
¶ 21 Clark next contends that ALJs lack the constitutional
authority to make binding legal decisions. We disagree.
8 To the extent that Clark intended to argue a vindictive prosecution
claim, he does not develop an argument in that regard. Thus, we don’t consider it. See Woodbridge Condo. Ass’n v. Lo Viento Blanco, LLC, 2020 COA 34, ¶ 41 n.12, aff’d, 2021 CO 56.
9 ¶ 22 We review de novo a challenge to a statute’s constitutionality.
E-470 Pub. Highway Auth. v. Revenig, 91 P.3d 1038, 1041 (Colo.
2004). However, such a challenge faces a very high bar. “Because
we respect the roles of the legislative and executive branches, we
presume that statutes are constitutional . . . .” Woldt v. People, 64
P.3d 256, 266 (Colo. 2003). By “challenging the constitutionality of
a statute[, Clark] bears a heavy burden of proving the statute
unconstitutional beyond a reasonable doubt.” People v. Vasquez,
84 P.3d 1019, 1022 (Colo. 2004) (quoting People v. Bossert, 722
P.2d 998, 1002 (Colo. 1986)).
¶ 23 In support of his challenge, Clark cites the following United
States Supreme Court cases: Lucia v. Securities & Exchange
Commission, 585 U.S. 237, 244 (2018); Axon Enterprise, Inc. v.
Federal Trade Commission, 598 U.S. 175, 180 (2023); Securities &
Exchange Commission v. Cochran, 20 F.4th 194 (5th Cir. 2021), cert.
granted, 142 S. Ct. 2707 (U.S. May 16, 2022) (No. 21-1239), and
aff'd sub nom. Axon Enter., 598 U.S. at 180; Free Enterprise Fund v.
Public Co. Accounting Oversight Board, 561 U.S. 477, 484 (2010);
and Securities & Exchange Commission v. Jarkesy, 603 U.S. ___,
___, 144 S. Ct. 2117, 2139 (2024). He argues that these cases
10 mean that ALJs cannot make legally binding decisions because they
are not part of the United States judicial system.
¶ 24 Contrary to his assertion, none of the above cases stand for
this proposition. The most relevant of these cases is Jarkesy, which
addresses “a straightforward question” and holds that “the Seventh
Amendment entitles a defendant to a jury trial when the SEC seeks
civil penalties against him for securities fraud.” 603 U.S. at ___, 144
S. Ct. at 2127. At the heart of Jarkesy’s analysis was the
distinction between law and equity and the fact that the SEC
sought civil penalties in the form of monetary relief, a prototypical
legal remedy. See id. at 2129. However, Clark’s case is
distinguishable as it was not brought by the SEC, it is not a fraud
suit, and the Division is not seeking monetary relief. Thus, Jarkesy
is not applicable to this matter.
¶ 25 Likewise, Lucia only addresses a single unrelated question:
“whether the [Securities and Exchange] Commission’s ALJs are
‘Officers of the United States’ or simply employees of the Federal
Government.” 585 U.S. at 244. The Lucia court concluded that
“the Commission’s ALJs are ‘Officers of the United States,’ subject
11 to the Appointments Clause.” Id. at 251. This case does not
implicate the constitutionality of Colorado’s ALJs.
¶ 26 In Axon Enterprise, the Supreme Court explicitly stated that it
wasn’t resolving whether agencies’ actions are unconstitutional.
598 U.S. at 180 (“They maintain in essence that the agencies, as
currently structured, are unconstitutional in much of their work.
Our task today is not to resolve those challenges; rather, it is to
decide where they may be heard.”). By its own text, Axon Enterprise
does not apply to Clark’s assertion, let alone Colorado’s agencies.
¶ 27 Finally, Free Enterprise Fund addressed multilevel employment
protections of inferior federal government officers and whether they
could be removed under similar restrictions to the principal officers
they served under. 561 U.S. at 483. The Supreme Court
determined that this specific multilevel protection “is contrary to
Article II’s vesting of the executive power in the President” because
“[t]he President cannot ‘take Care that the Laws be faithfully
executed’ if he cannot oversee the faithfulness of the officers who
execute them.” Id. at 484 (quoting U.S. Const. art. II, § 1, cl. 1).
This case is also inapplicable to Clark’s broad challenge to the
constitutionality of Colorado’s ALJs.
12 ¶ 28 The matter before us is a Colorado securities license
revocation action brought under section 11-51-410(1)(b), C.R.S.
2024. Colorado law expressly permits ALJs to conduct hearings,
such as the one that occurred in this matter. See § 24-4-105(3)-(4),
C.R.S. 2024. And other divisions of this court have specifically
noted that ALJs have this authority. See W. Colo. Cong. v. Colo.
Dep’t of Health, 844 P.2d 1264, 1266 (Colo. App. 1992) (“At a
hearing only one of the following may preside: The agency, an
administrative law judge from the division of administrative
hearings, or, if otherwise authorized by law, a hearing officer who if
authorized by the law may be a member of the body which
comprises the agency.” (quoting § 24-4-105(3), C.R.S. 1988)).
¶ 29 Clark does not make any specific arguments about the
constitutionality of section 24-4-105. Instead, he generally
challenges the overall constitutionality of ALJs and administrative
decision-making. But as noted above, the cases Clark cites do not
support his argument. Thus, Clark has not carried his burden to
show the statute authorizing a state ALJ to hear this matter is
unconstitutional.
13 D. The License Revocation Decision
¶ 30 Lastly, Clark challenges the Commissioner’s ultimate
conclusions and findings on the grounds that (1) he cured all of the
deficiencies; (2) he did not willfully violate any Colorado securities
statute; and (3) there was no harm to the public.
1. Standard of Review and Applicable Law
¶ 31 Section 24-4-106(7), C.R.S. 2024, sets forth the standard of
review for agency actions. On review, we will affirm the agency’s
decision unless it is arbitrary or capricious, unsupported by the
evidence in the record, or contrary to law. See Coffman v. Colo.
Common Cause, 102 P.3d 999, 1005 (Colo. 2004); § 24-4-106(7)(a)
(“If the court finds no error, it shall affirm the agency action.”).
¶ 32 “When reviewing final agency actions, we . . . must examine
the record in the light most favorable to the agency’s decision.
Whether the record contains substantial evidence to support the
agency decision is a question of law.” Rigmaiden v. Colo. Dep’t of
Health Care Pol’y & Fin., 155 P.3d 498, 501 (Colo. App. 2006).
¶ 33 The purposes of the Colorado Securities Act “are to protect
investors and maintain public confidence in securities markets
while avoiding unreasonable burdens on participants in capital
14 markets.” § 11-51-101(2), C.R.S. 2024. Under this act, the
Commissioner may revoke a license if the licensed person “[h]as
willfully violated or willfully failed to comply [with the act].”
§ 11-51-410(1)(b). This includes a failure to provide clients with
mandatory disclosures and engaging in “conduct contrary to one or
more rules wherein the securities commissioner prohibits dishonest
or unethical conduct in connection with providing investment
advisory services.” § 11-51-410(1)(l)(I)-(II).
2. Presentation of the Transcripts
¶ 34 As an initial matter, Clark has not provided us with the
transcript from his hearing before the ALJ. As the appellant, Clark
is the moving party seeking to set aside the Commissioner’s final
decision. “It is incumbent upon the moving party to designate all
those portions of the record necessary for the appeal.” Hock v. N.Y.
Life Ins. Co., 876 P.2d 1242, 1252 (Colo. 1994); C.A.R. 10(d)(3) (“The
appellant must include in the record transcripts of all proceedings
necessary for considering and deciding the issues on appeal.”).
¶ 35 Because Clark didn’t designate the transcripts necessary to
decide the appeal, we review his contentions under the “well settled
[law] that appellate courts must presume the [lower body’s] findings
15 and conclusions are supported by the evidence when the appellant
has failed to provide a complete record on appeal.” People v.
Helmstetter, 914 P.2d 474, 477 (Colo. App. 1995); Hock, 876 P.2d at
1252. Thus, we must presume that the transcripts would support
the ALJ’s factual findings and evidentiary conclusions. We now
turn to Clark’s contentions that the Commissioner erred.
3. The Commissioner’s Decision Was Not Arbitrary or Capricious
¶ 36 Clark argues that, as a matter of fact, he did not willfully
violate the securities rules or ignore the alleged deficiencies. We
perceive no error.
¶ 37 In support of this argument, Clark first points us to a
September 2022 Financial Industry Regulatory Authority (FINRA)
arbitration award. This arbitration stemmed from Clark’s claims
against Charles Schwab & Co., Inc.9 for prima facie defamation of
character, emotional distress, breach of contract, breach of
fiduciary duty, tortious interference with contract, competition laws
violations, and antitrust laws violations. The FINRA arbitration
9 Clark says that other entities and individuals were party to the
FINRA arbitration, but the record before us lists only Charles Schwab & Co., Inc.
16 panel denied Clark’s claims in their entirety, finding that he had
failed to prove any of them.
¶ 38 Despite the decision against him, Clark points to a statement
within the FINRA award where the panel said that “there is no
evidence that Mr. Clark did anything dishonest or dishonorable.”
He asserts this proves that, during the Division’s enforcement
action, the ALJ erred in finding that he acted willfully or dishonestly
in violating the securities rules. His argument is misplaced.
¶ 39 The FINRA arbitration occurred almost a year before the ALJ’s
initial decision and resulted from a separate civil dispute between
Schwab and Clark. We agree with the ALJ’s analysis that “a FINRA
arbitration panel has no authority to enforce the Colorado
Securities Act, and its statements are not binding on the courts and
agencies who do.” The FINRA arbitration is inapplicable to this
matter.
¶ 40 Clark next argues that the ALJ’s findings that he acted
willfully and failed to cure deficiencies are wrong because it “is a
fact” that all deficiencies “were 100% cured,” and he didn’t “willfully
ignore[] CDS deficiencies.” It’s true that these are factual findings.
But because Clark failed to provide us with the transcripts of the
17 underlying hearing, we must presume that the ALJ’s findings and
conclusions against him “are supported by the evidence.”
Helmstetter, 914 P.2d at 477; Hock, 876 P.2d at 1252. Thus, we
have no basis to disturb the ALJ’s findings of fact on this point.
¶ 41 Finally, Clark also argues that the Commissioner’s conclusion
that revoking his securities license serves the public’s interest “is
absolute total and complete BS.” We disagree. The record before
us demonstrates that the Division has sought Clark’s compliance
with securities laws and rules for over a decade. The ALJ found
that Clark violated over fifteen rules and that Clark “cannot be
relied upon to follow these rules in the future.” Additionally, the
ALJ found that Clark “reject[s] regulation by the Commissioner and
[is] unlikely to conform to the rules of the Commissioner in the
future.” These are also factual findings, and thus, we must
presume they are supported by the missing transcripts. See
Helmstetter, 914 P.2d at 477.
¶ 42 The ALJ ultimately concluded that “[r]evocation of [Clark’s]
license[] is the only responsible sanction.” In turn, the
Commissioner adopted that determination and concluded that
revoking Clark’s license was in the public interest. We perceive no
18 error in this conclusion. Terminating the license of an investment
advisor who is unable to comply with the Colorado Securities Act
and associated rules for more than a decade serves the public
interest.
¶ 43 Given this record, the Commissioner’s decision to revoke
Clark’s license was not arbitrary or capricious, unsupported by the
evidence, or contrary to law.
III. Disposition
¶ 44 The Commissioner’s final order is affirmed.
JUDGE HARRIS and JUDGE YUN concur.