In the Matter of Jason Ray Clark
No. 23CA2061
Colorado Court of Appeals
October 24, 2024
Colorado Division of Securities Case No. XY 2022-0001; Division IV; Opinion by JUDGE KUHN; Harris and Yun, JJ., concur; NOT PUBLISHED PURSUANT TO C.A.R. 35(e)
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
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,
- 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
¶ 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
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
¶ 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
¶ 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
¶ 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
¶ 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
¶ 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.
¶ 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
¶ 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
¶ 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
¶ 29 Clark does not make any specific arguments about the constitutionality of
¶ 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
¶ 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
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
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
¶ 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
¶ 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
¶ 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.