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Ashton v. Department of Commerce and Securities Commission

Court of Appeals of Utah

October 18, 2019

Stephen Abraham Ashton and One for the Money Financial Inc., Petitioners,
v.
Department of Commerce and Securities Commission, Respondents.

          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.

          OPINION

          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, 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 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 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. ...


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