§ 2.5 A NOTE ON THE CORPORATION COMMISSION'S SECURITIES-LAW PRECEDENT

• Jurisdiction: Arizona

§ 2.5 A Note on the Corporation Commission's Securities-Law Precedent

Although securities-law decisions and orders by the Arizona Corporation Commission²³⁸ are available on Westlaw and Lexis,²³⁹ practitioners and the courts seem generally unfamiliar with this body of administrative law. Often this administrative precedent provides guidance on issues of Arizona securities law for which judicial precedent is nonexistent or rudimentary.

Examples of Commission orders or decisions involving scienter, post-sale fraud, and investment rollovers are cited in the footnote.²⁴⁰ Commission decisions can also be useful in identifying facts that are material.²⁴¹

Statutory interpretations by administrative agencies like the Corporation Commission are often afforded judicial deference.²⁴² If the statute is one the agency is entrusted to enforce,²⁴³ the agency's interpretation is commonly given considerable weight.²⁴⁴ The Commission's hearing officers and staff will often have technical expertise the courts lack.²⁴⁵ And unlike a court, which is limited to deciding the case before it, the Commission, and in particular its Securities Division, has ongoing responsibility for the securities statutes.²⁴⁶ Thus, the Commission is likely to be better informed than the courts about the statutory history and the practical implications of competing interpretations. Additionally, the Commission's officers and staff will characteristically have more time to devote to the issues raised by a specific controversy or problem. More time, coupled with the Commission's broad investigative powers,²⁴⁷ means more information will frequently be available in the agency setting than judicially. For these reasons, the Commission's securities-law views are an important body of experience and informed judgment that should not be overlooked.²⁴⁸

A 2003 decision by the Court of Appeals acknowledged the importance of the Commission's administrative precedent.²⁴⁹ The decision holds that the Commission's interpretation of the securities statutes is entitled to "great deference."²⁵⁰ This deference to administrative interpretations is typical of that found in other states' interpretations of their securities statutes.²⁵¹

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Notes:

^[238] The Commission's regulatory powers under the securities statutes are described in Jennings v. Woods, 194 Ariz. 314, 322-23 ¶¶ 33-41, 982 P.2d 274, 282-83 ¶¶ 33-41 (1999).

^[239] The decisions are collected in Westlaw in the Arizona Securities Administrative Decisions database (AZSEC-ADMIN) and in Lexis in the AZ Corporation Commission Decisions database (AZSEC).

^[240]See, e.g., Nutek Info. Sys., Inc., No. S-3046-I, 1996 WL 494745, at *11 (Ariz. Corp. Comm'n Aug. 22, 1996) (holding that scienter is not required for violations of clause (3) of § 44-1991 (now § 44-1991(A)(3))); Judith Marie Otto, No. S-2896-I, 1993 WL 353421, at *3-4 (Ariz. Corp. Comm'n Aug. 11, 1993) (concluding that post-sale misrepresentations that induce an investor to hold a security may violate § 44-1991 (now § 44-1991(A))); Lost Dutchman Invs., Inc., No. S-2299-I, 1993 WL 173726, at *11 (Ariz. Corp. Comm'n Apr. 8, 1993) (concluding that transactions in which investments in one partnership are rolled into another partnership are securities sales even though no cash is paid). See generally Richard G. Himelrick, The Importance of Statutory...