(1) The securities
commissioner may by order deny an application for a license, suspend or revoke a
license, censure a licensed person, limit or impose conditions on the securities
activities that a licensed person may conduct in this state, and bar a person from
association with any licensed broker-dealer, investment adviser, or federal covered
adviser in the conduct of its business in this state in such capacities and for such
period as the order specifies. These sanctions may be imposed only if the securities
commissioner makes a finding, in addition to the findings required by section 11-51-704 (2), that the applicant or licensed person or, in the case of a broker-dealer or
investment adviser, a partner, officer, director, person occupying a similar status or
performing similar functions, or person directly or indirectly controlling the broker-dealer or investment adviser:
(a) Has filed an application for a license with the securities commissioner
that, as of the effective date of the license or as of any date after filing in the case
of an order denying effectiveness, was false or misleading as a result of an untrue
statement of a material fact or an omission to state a material fact, unless the
applicant sustains the burden of proof that the applicant did not know and in the
exercise of reasonable care could not have known of the untruth or omission;
(b) Has willfully violated or willfully failed to comply with any provision of
this article or any rule or order under this article, except any rule that is subject to
the additional findings required by paragraph (g) of this subsection (1);
(c) Within the past ten years, has entered a plea of guilty or nolo contendere
to, or has been convicted of, any felony, any misdemeanor involving a breach of
fiduciary duty or fraud, or any misdemeanor in connection with a purchase or sale of
a security;
(d) Is subject to a temporary or permanent injunction issued by a court of
competent jurisdiction in an action instituted by the securities commissioner, the
securities agency or administrator of another state or a foreign jurisdiction, the
securities and exchange commission, or the commodity futures trading commission,
for violating any securities registration or broker-dealer, investment adviser,
federal covered adviser, or similar license requirement in any federal, state, or
foreign law or for engaging in fraudulent conduct;
(e) Is currently the subject of an order of the securities commissioner
denying, suspending, or revoking the person's license as a broker-dealer,
investment adviser, sales representative, or investment adviser representative or
barring the person from association with any licensed broker-dealer, investment
adviser, or federal covered adviser;
(f) Is currently the subject of any of the following orders issued within the
past five years:
(I) An order by the securities agency or administrator of another state or a
foreign jurisdiction, entered after notice and opportunity for hearing and based
upon fraudulent conduct, denying or revoking the person's license as a broker-dealer, investment adviser, sales representative, or investment adviser
representative, or the substantial equivalent of those terms, or suspending or
barring the right of the person to be associated with a broker-dealer, investment
adviser, or federal covered adviser;
(II) An order by the securities and exchange commission, entered after notice
and opportunity for hearing, denying, suspending, or revoking the person's
registration as a broker-dealer under the federal Securities Exchange Act of 1934
or as an investment adviser under the federal Investment Advisers Act of 1940 or
suspending or barring the right of the person to be associated with a broker-dealer
or investment adviser;
(III) An order by the commodity futures trading commission, entered after
notice and opportunity for hearing, denying, suspending, or revoking registration
under the federal Commodity Exchange Act; or
(IV) A suspension or expulsion from membership in or association with a
member of a self-regulatory organization;
(g) Has willfully engaged in a course of conduct involving the violation of one
or more rules made by the securities commissioner that prohibit unfair and
dishonest dealings by a broker-dealer or sales representative, including any rule
that may be made to define conduct prohibited by section 11-51-501, if each such
rule is based upon a finding, in addition to the findings required by section 11-51-704
(2), which finding itself must be based on information provided by broker-dealers
and sales representatives at a hearing on the proposed rule, that licensed broker-dealers and sales representatives who will be required to comply with the rule
generally agree that the conduct prohibited by the rule does not meet prevailing
standards of fair and honest dealing within the securities industry and that it is
reasonable to expect the rule will prevent or deter such conduct;
(h) In the case of a broker-dealer who is not registered under the federal
Securities Exchange Act of 1934, is not in compliance with of section 11-51-407
(4);
(i) Has failed reasonably to supervise, with a view to preventing violations of
this article, another person who is subject to the person's supervision and who
commits such a violation, but for the purpose of this paragraph (i) no person shall be
deemed to have failed to supervise another person if there existed established
procedures, and a system for applying such procedures, which would reasonably be
expected to prevent and detect, insofar as practicable, any such violation by such
other person and such person reasonably discharged the duties and obligations
incumbent upon such person by reason of such procedures and system without
reasonable cause to believe that such procedures and system were not being
complied with;
(j) Has ceased to do business as a broker-dealer, investment adviser, sales
representative, or investment adviser representative;
(k) Has offered or sold to a public entity in the state of Colorado a financial
instrument that such person knew or should have known does not qualify for sale to
the public entity under section 24-75-601.1, C.R.S.;
(l) In the case of an investment adviser or investment adviser representative,
willfully has:
(I) Failed to provide a client with a written disclosure statement as required
pursuant to section 11-51-409.5; or
(II) Engaged in conduct contrary to one or more rules wherein the securities
commissioner prohibits dishonest or unethical conduct in connection with providing
investment advisory services. This subparagraph (II) applies to an investment
adviser representative employed by or affiliated with a federal covered adviser only
to the extent permitted under the federal National Securities Markets
Improvement Act of 1996. In the interests of uniformity, any rules promulgated
pursuant to this subparagraph (II) shall be coordinated and consistent with the
regulation of federal covered advisers by the securities and exchange commission
under the federal Investment Advisers Act of 1940 and the rules promulgated
pursuant to that act, and with the rules of other states regarding such conduct by
investment advisers and investment adviser representatives, unless the securities
commissioner makes the specific finding that to do so would be contrary to the
public interest, the protection of investors and advisory clients in this state, and the
purposes of this article.
(m) After notice and opportunity for a hearing, has been found within the
previous ten years:
(I) By a court with jurisdiction, to have wilfully violated the laws of a foreign
jurisdiction under which the business of securities, commodities, investment,
franchises, insurance, banking, or finance is regulated;
(II) To have been the subject of an order of a securities regulator of a foreign
jurisdiction denying, revoking, or suspending the right to engage in the business of
securities as a broker-dealer, agent, sales representative, investment adviser,
investment adviser representative, or similar person; or
(III) To have been suspended or expelled from membership or participation in
a securities exchange or securities association operating under the securities laws
of a foreign jurisdiction; or
(n) (I) Is not qualified because of training, experience, or knowledge of the
securities business; except that in the case of an applicant who is a sales
representative for a broker-dealer that is a member of a self-regulatory
organization or for an individual as an investment adviser representative, a denial
order may not be based on this paragraph (n) if the applicant has successfully
completed all examinations required by this article.
(II) The securities commissioner may require an applicant for a license
pursuant to section 11-51-403, who has not been registered or licensed in any state
within the two years preceding the filing of an application in this state, to
successfully complete an examination.
(2) The securities commissioner may not begin a proceeding under this
section against any person more than ninety days after a license has been issued to
that person on the basis of a fact or transaction which the person shows was known
to the securities commissioner when the license was issued or when any prior
license of the same class was issued to that person if such prior license was not
revoked on the basis, in whole or in part, of such fact or transaction.
(3) For good cause shown the securities commissioner may waive or modify
an order previously made under this section as it applies to any person with the
consent of that person.
(4) The securities commissioner may suspend the license of a licensee
pursuant to a summary order issued under section 11-51-606 (4) and such order
shall be valid pending a final determination in any proceeding brought pursuant to
this section subject to any modification made to such order under section 11-51-606
(4)(c).
(5) Where a person is an applicant for a license, or is licensed by the
securities commissioner in more than one capacity, or both, and one or more
grounds for sanction as set forth in subsection (1) of this section as they may apply
to one application, license, or association with a broker-dealer, investment adviser,
or federal covered adviser has been established either by findings of fact and
conclusions of law or alleged before the securities commissioner on stipulation, the
securities commissioner may impose one or more of such sanctions not only
regarding the application, license, or association giving rise to the matter, but also
upon any other application, license, or association under this section if the
securities commissioner makes the additional findings that to do so is necessary
and appropriate in the public interest and for the protection of investors.