|The Colorado Lawyer|
Vol. 40, No. 12 [Page 31]
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Colorado Securities Act—Twenty Years Later
by Gerald Rome, Joshua M. Green
Business Law articles are sponsored by the CBA Business Law Section to apprise members of current substantive law. Articles focus on business law topics for the Colorado practitioner, including antitrust, bankruptcy, business entities, commercial law, corporate counsel, financial institutions, franchising, and securities law.
Trygve E. Kjellsen of Lathrop & Gage LLP, Denver—(720) 931-3145, firstname.lastname@example.org; David P. Steigerwald of Sparks Willson Borges Brandt & Johnson, P.C., Colorado Springs—(719) 475-0097, email@example.com; Curt Todd, Denver—(303) 955-1184, firstname.lastname@example.org
About the Authors
Gerald Rome serves as the Deputy Securities Commissioner for the Colorado Division of Securities. He also is an adjunct professor at the University of Denver, Daniels College of Business—Gerald.Rome@dora.state.co.us. Joshua M. Green is a solo practitioner in Utah who has worked as a legal intern in the Colorado Division of Securities—email@example.com.
This article examines how the courts have treated the expanded provisions of the Colorado Securities Act of 1990. Consistent with the legislative purpose underlying the 1990 Act, courts continue to broadly and liberally interpret the Act to ensure robust protection of investors and Colorado financial markets.
On July 1, 2010, the Colorado Securities Act of 1990 (Act) and the changes it ushered into the state securities regulatory scheme turned 20.1 What began as a special committee of the Colorado Bar Association (CBA) charged with thoroughly reviewing the 1981 Act would lead to the enactment of comprehensive changes to Colorado’s securities laws.2 After a six-month review of the 1981 Act, the CBA special committee decided that significant and substantive changes were necessary.3 Using the Revised Uniform Securities Act (RUSA) as a model, the special committee completely rewrote the 1981 Act. Although much of the old Act remained, many new provisions were included.4
The CBA proposed Act would make revisions to nearly every provision of the 1981 Act, from registration and licensing requirements to exemptions and criminal and civil liability.5 On enactment, the 1990 Act was met with largely positive feedback focusing on the need for the new legislation to better protect investors while simultaneously encouraging a robust and fertile environment for economic growth.6
Although the scope of the changes in the 1990 Act was historic, the effect of the legislative amendments most often has been felt in the courtroom. Understanding how the courts have treated the expanded provisions of the Act is crucial to practicing in the field of securities. This article examines the 1990 Act and discusses how Colorado courts have interpreted it. This article is intended to convey practical considerations practitioners should keep in mind when reviewing potential securities issues.
Defining a Security
The purposes of the 1990 Act and the 1981 Act7 are identical: "to protect investors and maintain public confidence in securities markets while avoiding unreasonable burdens on participants in capital markets."8 The Act specifies that its provisions should be broadly construed and interpreted liberally to bring about the Act’s purpose.9 Colorado courts have focused on the purpose of the Act as they have taken on the task of defining a security within the parameters of the statute.10 With this broad interpretive mandate in mind, Colorado courts have not hesitated to interpret the Act consistent with its statutory aims.11 In the last twenty years, Colorado courts have broadened the concept of a security with regard to investment contracts, viatical settlement investments, and joint venture interest as securities.
Modifying Federal Holdings
on Investment Contract Analysis
Colorado investment contract analysis originates from the U.S. Supreme Court decision SEC v. W.J. Howey Co.12 Colorado courts have consistently acknowledged that that the Howey test is the proper test for investment contract analysis in Colorado.13 Accordingly, the test for an investment contract remains:
1) a contract, transaction, or scheme whereby a person invests his or her money;
2) in a common enterprise; and
3) is led to expect profits derived from the entrepreneurial or managerial efforts of others.14
In adopting the Howey test, Colorado courts embraced a more flexible barometer to meet the "countless and variable schemes devised by those who seek the use of the money of others on the promise of profits"—one that could be adapted over time.15
The Colorado Court of Appeals in Joseph v. Viatica Management, LLC was presented with the issue of whether investor’s interests in the Viatica Fund, which then used the funds to purchase viatical settlements, were considered investment contracts.16 Viatical settlements and, broadly, life settlements, are life insurance policies purchased from terminally ill patients.17 Investors bet that the insured will die sooner rather than later so that they can realize the death benefits in exchange for a discounted payment to the terminally ill patients.18
The court did two things. First, although it recognized that the provisions of the Act shall be coordinated with federal acts and statutes to the extent consistent with the purposes of the Act,19 it declined to follow the DC Circuit Court’s opinion in SEC v. Life Partners, Inc.,20 which held that viatical settlements were not investment contracts.21 The Viatica court distinguished Life Partners by pointing to the prophylactic and remedial purposes of the Act and its duty to interpret the Act broadly.22 The court also held that the interests purchased by investors in the Viatica Fund constitute investment contracts under the rationale in Howey.23 This decision was issued on August 1, 2002.
In 2005, the Colorado Legislature codified the Viatica decision by amending the definition of a security in the Act.24 Senator Owens, who sponsored the bill, articulated a need for regulating the secondary market of life settlements or viaticals.25 Many who opposed the legislation felt the bill did not go far enough in protecting investors from fraud.26 They expressed fears that the bill was inadequate with regard to disclosure requirements and claimed that the bill failed to require brokers dealing in viaticals to pass a licensing test.27 However, by defining viatical settlements as securities, legislators provided consumers the full and fair disclosure protections of the Act when purchasing viatical or life settlements.
Partnership Interests as Investment Contracts
Colorado appellate courts have consistently held that in applying the Howey test, the analysis of the transaction does not depend on the name or form of the instruments, but on the substantive economic realities underlying the transaction.28 In Feigin v. Digital Interactive Associates, the court determined that the securities commissioner’s search warrant affidavit was sufficient to state probable cause that the general partnership interests being sold constituted investment contracts.29 In reaching this conclusion, the court rejected the analysis in Banghart,30 a Tenth Circuit case applying the Howey test. There, the court held that the inquiry into whether partnership interests were securities was limited to whether management powers were reserved in the partnership agreement, not whether the general partners actually exercised those powers.31
Instead, the court looked to the analysis found in Williamson v. Tucker, which held that determining whether general partnership interests qualify as an investment contract "is to be made on the basis of substance, or economic reality, not form."32 Essentially, courts will look to see how much control the investors actually have over the investment and its ultimate outcome.33 Citing Williamson, the court in Digitial Interactive explained that certain general partnerships where an agreement between partners "places the controlling power in the hands of certain managing partners" could be construed as an investment contract as to the partners who no longer have control.34
Although the court in Digital Interactive used Williamson as a guide, the court provided additional analysis.35 The Digital Interactive opinion states that the court would be more likely to find that a general partnership is operating as an investment contract if certain factors were met.36 Such factors would include whether the general partnership was: (1) targeting senior citizens, individuals who did not know the promoter, individuals who did not know any of the other partners, investors in a vastly diverse geographic pool, individuals with complete disregard for investor "expertise, or prior interest in, the business of the partnership"; (2) acquiring more than 400 partners; or (3) vesting management "in a management committee with expertise."37 Although the court did not elaborate as to the weight of these factors, the opinion emphasizes the importance of economic reality rather than the form.38 Digital Interactive should put practitioners on notice that the court is willing to broadly construe the text of the Act to protect investors and effectuate the statute’s purposes.39
Following Digital Interactive, in 2002, the court in Toothman v. Freeborn & Peters applied the same economic realities test to limited liability partnership (LLP) interests.40 In Toothman, the plaintiffs alleged that defendants defrauded investors in connection with the sale of interests in LLPs established to sell prepaid cellular phone service.41 The question of whether the LLP interests were securities was determinative of whether individual questions predominated over common ones in determining class certification.42
The court found that the pivotal issue in the case from an investment contract analysis was whether the investor expects profits from the managerial efforts of someone else.43 Following earlier precedent, the court noted that the relevant inquiry is whether the investor has substantial power to affect the success of the enterprise.44 Colorado’s economic realities analysis comports with the requirements of Howey to the effect that form must not control over the substance of the transaction.
Registration of Securities
Under the 1990 Act, any person who sells or offers to sell a security must register the offering with the Division of Securities.45 Unless a person has registered an offering or it is exempted from registration, he or she may be subject to sanctions.46 Promoters of investments must be prudent, because failure to comply with even the smallest requirements may invalidate an exemption.47 The Joseph v. Black Diamond Fund, LLLP case, decided in 2009, dealt with this very issue.48
How to Lose an Exemption
In Black Diamond, the defendants knowingly sold unregistered securities,49 claiming they qualified for an exemption under U.S. Securities and Exchange Commission (SEC) Rule 506 of Regulation D,50 a safe harbor for private offerings.51 Chief among the Regulation D requirements is that no general solicitation or advertising is permitted in connection with the offers, including any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.52 If Black Diamond could prove that it met the criteria under Regulation D, it would be exempted under the 1990 Act.53
In concluding that Black Diamond did not meet its burden, the Colorado Court of Appeals found that people invited to the free lunch seminars did not have a "preexisting relationship" with Black Diamond.54 The court also found that Black Diamond offered or contemplated offering its interests at the time of the free meal seminar and no evidence was offered to indicate that Black Diamond had developed a "substantive relationship" with them between the time of these seminars and the time the Black Diamond securities were offered.55
Because the court found that Black Diamond had engaged in general solicitation, Black Diamond was no longer entitled to an exemption, and the violation of the registration provision was upheld.56 The Black Diamond case presents a word of caution to other promoters to ensure that they are meeting the requirements of the exemptions they are claiming.
Black Diamond was also charged with employing an unlicensed sales representative.57 At issue was whether the facts supported the conclusion that the Black Diamond agent met the definition of sales representative under the Act.58 A "sales representative" is defined as an individual "authorized to act and acting for a broker–dealer in effecting or attempting to effect purchases or sales of securities."59 In concluding that the Black Diamond agent acted as a sales representative, a Colorado court, for the first time, gave guidance as to the meaning of the term "effecting" with respect to the sale of a security.60
How to Effect a Securities Transaction
Looking to federal securities law, the court found that evidence indicative of effecting a securities transaction is whether the individual receives transaction-based compensation, because such compensation is triggered by the effecting of the sale.61 Although the court agreed with federal authorities that transaction-based compensation was the hallmark of broker status, it also identified other factors that would establish sales representative status.62 Again citing federal authorities, the court stated that individuals who solicit investors by phone and in person and who distribute documents and prepare and distribute sales circulars in the hope that potential investors will deposit money in the account are seeking to effect securities transactions.63 Evidence of actively participating in securities transactions at key points in the chain of distribution is indicative of effecting securities transactions.64
Setting the Public Interest Standard
Before an individual can transact any business in the capacity of a broker–dealer, sales representative, or investment advisor, he or she must be licensed.65 The Commissioner can deny an application for a license or sanction a licensee if certain conditions are met, including a finding that the action is necessary or appropriate in the public interest.66 In Westmark Asset Mgmt. Corp. v. Joseph, the Colorado Court of Appeals affirmed the public interest standard used by the Commissioner in denying Westmark’s application for licensure.67 The plaintiffs were appealing the Commissioner’s decision to deny them an investment advisor license despite a ruling from an Administrative Law Judge (ALJ) that the licenses should be approved.68 Even though the ALJ’s opinion was a "well-reasoned" decision, the court of appeals affirmed the Commissioner’s decision to deny the application.69
Commissioner has authority to deny licenses under the Colorado Securities Act. Under the Act, the Commissioner, when denying or sanctioning a license, must articulate how the Commissioner’s actions are "necessary or appropriate in the public interest and  consistent with the purposes and provisions of this article."70
Public interest decisions. From a practical standpoint, determining what is in the public interest or consistent with the purposes of the Act is left to the discretion of the Commissioner.71 The rationale behind this policy is that the Act requires "technical expertise," which the Commissioner possesses.72 In Westmark, the Commissioner cited the factors used in Steadman v. SEC73 as guidance in determining the public interest.74 These factors include:
1) the egregiousness of the respondent’s actions;
2) the isolated or recurrent nature of the infractions;
3) the degree of scienter involved;
4) the sincerity of the respondent’s assurances against future violations;
5) the respondent’s recognition of the wrongful nature of his or her conduct; and
6) the likelihood that his or her occupation will present opportunities for future violations.75
This case is instructive to practitioners and traders because it provides clear guidelines as to how the Commissioner likely will determine what is in the public interest.76
Commissioner not bound by ALJ’s findings. Courts will afford due deference to the Commissioner’s final decisions provided that the findings "have a reasonable basis in the law and are supported by substantial facts."77 Even though the court in Westmark found the ALJ’s decision to be well-reasoned and fair, it also found that the record reflected substantial evidence to support the Commissioner’s decision to deny the licenses.78 Westmark illustrates that courts are reluctant to overturn agency decisions provided there is some reasonable basis for those decisions.79
The Act is a remedial statute80 and, as such, it provides the Commissioner three means of enforcing its provisions.81 The Commissioner can seek criminal sanctions or civil sanctions, or can issue a cease and desist order.82 Available civil sanctions include the authority to seek a temporary or permanent injunction.83 In Joseph v. Equity Edge, LLC,84 the court addressed the Commissioner’s injunctive authority, as well as the criteria for entry of a permanent injunction.85
The Act authorizes the Commissioner to apply to the district court for injunctive relief whenever there is "sufficient evidence satisfactory to the securities commissioner that any person has engaged in or is about to engage in any act" that violates the Act.86 This language outlines when the Commissioner can bring such an action. Colorado courts have held that the plain language of the statute would allow the Commissioner to obtain "a permanent injunction based on past," as well "threatened future, violations of the Act."87 Equity Edge, however, deals with when the court should grant injunctive relief.88
Under C.R.C.P. 65 and the related common law test for injunctive relief, four mutually exclusive factors must be demonstrated to get the court to issue an injunction.89 The factors are:
(1) that a danger of real, immediate, and irreparable injury exists, (2) that a plain, speedy, and adequate remedy at law is lacking, (3) that the injunction would not disserve the public interest, and (4) that the public interest favors the injunction.90
These elements are not new to Colorado, but have been established by Colorado precedent and are standard analysis for dealing with permanent injunctions in other contexts.91
However, the Equity Edge decision departs from this precedent.92 In its opinion, the court stated that the court’s discretion in reviewing injunctive relief claims "under the CSA is narrower than that permitted by C.R.C.P. 65"93 in that the Commissioner is not required to prove or even plead that there is "irreparable harm, or exigent circumstances" in an application for a permanent injunction.94
Under the Equity Edge reasoning, the Commissioner need only demonstrate that:
1) past or potential future violations of the Colorado Securities Act exist;
2) that the injunction is not against the public interest; and
3) that the injunction is favored by the public interest.95
The Equity Edge court found that part one of the test had been met, but remanded the case to the trial court to make findings as to parts two and three.96 Thus, the court gave no further definition as to what factors courts should look to in determining whether the public interest favors an injunction or that the injunction is against the public interest in this instance.
Perhaps the biggest stick the Commissioner has to curb violations of the Act is criminal penalties.97 Although generally reserved for the most egregious offenses,98 criminal sanctions allow the Commissioner greater latitude in curtailing and stopping violations of the Act. The central criminal offense under the Act is securities fraud.99 To secure a conviction for securities fraud, the state must prove that the defendant:
in connection with the offer or sale of any security, directly or indirectly [willfully] employ[ed] any device, scheme or artifice to defraud, . . . [made] any untrue statement of material fact or omitted to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or engaged in any act, practice or course of business which operated as a fraud or deceit upon any person.100
Case law from the last decade demonstrates one major trend followed by the courts with regard to criminal prosecutions.101
Defendants’ knowledge is irrelevant. Colorado courts have consistently held that whether the defendants knew that the investment they were offering was a security is irrelevant in a criminal securities fraud case.102 Over the years, defendants relying on the word "willfully" in CRS § 11-51-501 have argued that this language requires the prosecution to prove that the defendants knew the financial instrument was a security.103
However, this reasoning has not resonated well with the Colorado courts, which have held that this argument runs counter to the legislative mandate to construe the provisions of the statute broadly, especially when coupled with the fact that the Act was enacted "with reference to federal securities regulations."104 Like the federal regulatory scheme, Colorado’s provisions are flexible so that, as investments become more complex and ingenious, they will still be covered by the securities laws.105 Therefore, noting that a knowledge requirement would undermine the legislative purposes of investor protection, Colorado courts have held that a defendant who has engaged in acts of fraud and deceit will be "no less culpable for being unaware of the statutory definition of a security."106
The practical ramifications of these rulings are that promoters must be extremely careful as they promote their financial products to individuals. Additionally, promoters must be familiar with state and federal securities laws. Ignorance is not a valid argument or defense.107 Similarly, because the definition of a security is designed to be very broad and flexible to adapt to the ever-changing financial markets,108 practitioners should be on notice that the current definition of a security under the Act anticipates that nearly any investment could come under the purview of the Act.109
The 2001 Amendment
In 2001, Colorado legislators enacted an amendment to the Act, which gave the Securities Commissioner more authority to protect investors in a timely manner.110 Before the amendment, the Commissioner was authorized to use only civil or criminal enforcement actions to combat potential fraud.111
Cease and Desist Authority
The Colorado State Auditor authorized an external audit of the Division of Securities in 2000. The audit found that Colorado was one of only a handful of states that did not grant regulators the authority to issue cease and desist orders.112 The audit also found that this lack of authority actually was increasing investor losses, because the other civil and criminal remedies at the Commissioner’s disposal were too slow to shut down illegal operations.113 Responding to the Division audit, legislators enacted CRS § 11-51-606 (2001 Amendment), which gives the Commissioner the authority to issue such orders, but also adopts additional provisions to ensure defendants are afforded procedural safeguards.114
As the 2000 audit pointed out, the Commissioner needs a means of enforcing the securities laws in a timely manner.115 The 2001 Amendment, granting the authority to issue cease and desist orders, allows the Commissioner to preemptively put a stop to fraudulent behavior or any other conduct that is not complying with the statute.116 The sanctions available to the Commissioner range from giving a simple direction to immediately stopping illegal conduct to setting conditions and limitations to the continued operation of their business.117
One of the novelties of the 2001 Amendment is that it provides the Commissioner a significant tool for combating fraudulent enterprises, while affording suspected violators with procedural safeguards against zealous execution of government authority.118 For example, the Commissioner must have "sufficient evidence" that an individual has, is, or will commit one of the three acts specified in the statute.119 In addition, individuals must be given prompt notice of the order accompanied by the "factual and legal basis for the order"120 and provided an opportunity to present their case at a special hearing.121 Even if the individual is not present at the hearing, the Commissioner must present evidence that notice was properly sent and cannot issue the order unless it is found by either the securities board or an ALJ that notice was properly served.122
Once arguments are made, the securities board must promptly issue an initial decision that must include "findings of fact, conclusions of law," and a recommendation with regard to the order to show cause.123 After an initial decision has been made, if there is a reasonable basis to issue the order, the Commissioner is authorized to do so and may impose proscribed sanctions.124 Thus, even though the Commissioner can issue the order regardless of the securities board’s decision, certain protections are provided to limit any perception of governmental abuse of power.
Despite the hurdles impeding the power of the Commissioner to issue cease and desist orders, they are small speed bumps compared to a civil or criminal process, which can take months or even years.125 The amendment simply places Colorado regulations on par with a majority of other states in ensuring the Commissioner’s power to quickly stop potential fraud126 while guaranteeing that suspected violators are afforded due process.127
Over the past twenty years, the Colorado Securities Act has been a great bulwark of protection to the investing community. The 1990 Act has proven effective, as evidenced by the relatively few substantial changes that have been made since its enactment. Colorado courts have broadly and liberally interpreted the Act to ensure robust protection of investors and Colorado’s financial markets. Although all legislation has shortfalls, the Act is accomplishing its overarching goals and purposes.
1. See generally CRS §§ 11-51-101 et seq.
2. Johnson et al., "The New Colorado Securities Act," 19 The Colorado Lawyer 1767 (Sept. 1990).
3. Id. at 1767.
5. See generally id.
6. See id. See also Feigin, "Colorado Securities Act of 1990: The Securities Commissioner’s View," 19 The Colorado Lawyer 2045 (Oct. 1990).
7. Johnson, supra note 2 at 1767.
8. CRS § 11-51-101(2).
10. See Joseph v. Viatica Mgmt., LLC, 55 P.3d 264, 267 (Colo.App. 2002).
11. People v. Rivera, 56 P.3d 1155, 1163 (Colo.App. 2002). See also People v. Pendergast, 87 P.3d 175, 178-79 (Colo.App. 2004).
12. SEC v. W. J. Howey Co., 328 U.S. 293, 298 (1946) (defining an investment contract as an investment of money "in a common enterprise with the expectation that they would earn a profit solely through the efforts of the promoter or of someone other than themselves").
13. Id. (as modified by United Housing Foundations Inc. v. Forman, 421 U.S. 837 (1975)); Toothman v. Freeborn & Peters, 80 P.3d 804, 811 (Colo.App. 2002).
14. Toothman, supra note 13 at 811, citing People v. Milne, 690 P.2d 829 (Colo.1984).
15. Id., citing Howey, supra note 12 at 299.
16. Viatica, supra note 10 at 265-66.
19. CRS § 11-51-101(3).
20. SEC v. Life Partners, Inc., 87 F.3d 536 (D.C.Cir. 1996), reh’g denied, 102 F.3d 587 (D.C.Cir.1996).
21. Id. at 548.
22. Viatica, supra note 10 at 267.
24. Laws 2005, Ch. 292, § 2, eff. Jan. 1, 2006 (codified as amended at CRS § 11-51-201(17)).
25. See Audio Transcripts from the Senate Committee on Business, Labor and Technology, SCR 354 at 10:17 a.m. (Feb. 15, 2005).
26. See id. at 11: 29 a.m.
28. See Feigin v. Digital Interactive Assoc., Inc., 987 P.2d 876, 881 (Colo.App. 1999); Toothman, supra note 13 at 811.
29. Digital Interactive, supra note 28 at 883.
30. Banghart v. Hollywood Gen. P’ship, 902 F.2d 805 (10th Cir. 1990).
31. Digital Interactive, supra note 28 at 881.
33. Williamson v. Tucker, 645 F.2d 404, 421 (5th Cir. 1981).
34. Digital Interactive, supra note 28 at 882, citing Williamson, supra note 33 at 422-23.
35. Id. at 883.
38. Id. at 881.
39. CRS § 11-51-101(2).
40. Toothman, supra note 13 at 811.
41. Id. at 807.
42. Id. at 810.
43. Id. at 813.
45. CRS § 11-51-301.
47. Compare Joseph v. Black Diamond Fund, LLP, 211 P.3d 727 (Colo.App. 2009), with 17 C.F.R. § 230.509(a) (limiting the minor infractions of the exemption to subsection (a)).
48. Black Diamond, supra note 47.
49. Id. at 727, 730-31.
50. Id. at 731.
51. 17 C.F.R. § 230.502(b).
52. 17 C.F.R. § 230.502(c).
53. CRS § 11-51-308(p).
54. Black Diamond, supra note 47 at 732-33.
57. Id. at 734.
58. Id. at 733-34.
59. CRS § 11-51-201(14).
60. Black Diamond, supra note 47 at 734.
65. CRS § 11-51-401(1).
66. Westmark Asset Mgmt. Corp. v. Joseph, 37 P.3d 516, 517-18 (Colo.App. 2001).
67. Id. at 521.
68. Westmark, supra note 66 at 517-18.
70. Id. at 518. See also CRS § 11-51-704(2).
71. Westmark, supra note 66 at 521.
73. Steadman v. SEC, 603 F.2d 1126 (5th Cir. 1979).
74. Westmark, supra note 66 at 519.
77. Id. at 520.
78. Id. at 521.
79. Id. at 520.
80. CRS § 11-51-101(2).
81. See CRS §§ 11-51-602, -603, -604, and -606.
82. See discussion under the heading "The 2001 Amendment," infra.
83. Joseph v. Equity Edge, LLC, 192 P.3d 573, 576 (Colo.App. 2008).
84. See id.
85. Id. at 576.
86. CRS § 11-51-602(1). See also Equity Edge, supra note 83 at 576.
87. Equity Edge, supra note 83 at 576, quoting Viatica, supra note 10 at 268).
88. Id. at 576-77.
89. C.R.C.P. 65 (2007); Equity Edge, supra note 83 at 576.
90. Equity Edge, supra note 83 at 576.
91. See Rocky Mountain Animal Defense v. Colo. Div. of Wildlife, 100 P.3d 508 (Colo.App. 2004). See also Rathke v. MacFarlane, 648 P.2d 648 (Colo. 1982); C.R.C.P. 65.
92. Equity Edge, supra note 83 at 577.
93. Id., citing Kourlis v. Dist. Ct., 930 P.2d 1329 (Colo. 1997). See also Digital Interactive, supra note 28 at 883.
94. Equity Edge, supra note 83 at 577.
97. CRS § 11-51-603.
98. The most recent example is the sentencing of Mark Jackson, who pleaded guilty to charges related to operating a $32 million Ponzi scheme. See Raabe, "Ponzi schemer sentenced Metro-area investment adviser Mark Jackson asked the court for leniency but got 15 years instead," The Denver Post B-08 (May 26, 2010).
99. CRS § 11-51-501.
101. See People v. Pahl, 169 P.3d 169 (Colo.App. 2006) (holding that the victims’ belief that they were not purchasing a security is irrelevant in criminal securities fraud analysis).
102. See id.; People v. Hoover, 165 P.3d 784 (Colo.App. 2006) (holding that proof that the defendant knew they were offering a security is not required); People v. Rivera, 56 P.3d 1155 (Colo.App. 2002) (rejecting defendant’s argument that the court erred in not instructing the jury that it needed to find defendant "knew a security was being offered").
103. See generally id.
104. Rivera, supra note 102 at 1163.
106. Id., citing United States v. Brown, 578 F.2d 1280 (9th Cir. 1978).
109. CRS § 11-51-201(17).
110. Lidstone and Joseph, "Putting the Brakes on Securities Fraud Cease and Desist Authority," 30 The Colorado Lawyer 73, 73 (Sept. 2001).
111. Id. at 74.
114. CRS § 11-51-606(1.5) (amended 2001).
115. Lidstone, supra note 110 at 74.
116. CRS § 11-51-606(1.5)(a).
117. CRS § 11-51-606(1.5)(d)(A) to (C).
118. CRS § 11-51-606(1.5). See also Lidstone and Joseph, supra note 110 at 74.
119. CRS § 11-51-606(1.5)(a).
120. CRS § 11-51-606(c).
122. CRS § 11-51-606(d)(II).
123. CRS § 11-51-606(d)(III).
124. CRS § 11-51-606(d)(IV)(A) to (C).
125. Lidstone and Joseph, supra note 110 at 76.
126. Id. at 74.
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