The Colorado Court of Appeals issued its opinion in Joseph, Colorado Securities Commissioner v. Meika Corporation on May 10, 2012.
Colorado Securities Act—Cease and Desist Order.
Respondents Mieka Corporation, Daro Blankenship, and Stephen Romo appealed the order prohibiting them from committing any violation of the Colorado Securities Act (CSA), CRS §§ 11-51-101 to -908, in connection with the offer and sale of any security in or from the State of Colorado. The judgment was affirmed.
The Colorado Division of Securities (Division) issued an order directing respondents to show cause why a final order should not be entered against them in conjunction with the alleged sale of securities. The order alleged respondents had violated provisions of the CSA by offering for sale interests in a joint venture to develop an oil and gas lease in Pennsylvania (Joint Venture).
The Division, through a hearing panel (Panel), issued a detailed opinion concluding that the presented evidence established that the interests in the Joint Venture were securities under the CSA and that there had been an offer and sale of such security interests. Because those securities had not been registered with the Division, the Panel recommended that the Colorado Securities Commissioner (Commissioner) issue a cease and desist order against respondents to enjoin them from violating the CSA.
In April 2011, the Commissioner affirmed the decision of the Panel and made two additional conclusions of law: (1) that “the strong presumption that general partnerships are not securities as found in the Williamson case [Williamson v. Tucker, 645 F.2d 404 (5th Cir. 1981)] is not the law under the Colorado Securities Act”; and (2) that respondent Romo had acted as an unlicensed broker-dealer or sales representative, in violation of CRS § 11-51-401(2). These additional conclusions were appealed by respondents.
Respondents argued that the conclusion of the Panel and the Commissioner that the Joint Venture interests were unregistered securities because they were interests in an investment contract was based on an erroneous view of the law or was unsupported by substantial evidence in the record. The Court of Appeals declined to address the first contention, because the Panel and the Commissioner found that the Joint Venture interests were securities on grounds that did not turn on the legal argument made by respondents. The Court then found that there was substantial evidence in the record to support the decision of the Panel and the Commissioner. The judgment was affirmed.
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