Matter of Clark Brothers

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.

19