Did you enter into a settlement with or get sanctioned by the Utah Division of Securities more than five years ago? Have you paid your fine and otherwise complied with the securities laws in Utah since that time? If so, you may be eligible to have the record of your disciplinary action and final order (if one was entered) removed from the Division of Securities’ Online Database under a new law that went into effect on May 10, 2016.
HB 118 was sponsored this session by Representative Brian Greene who represents District 57 in Pleasant Grove, Utah. I have not spoken to Rep. Greene about the bill, but I understand that it was prompted by complaints from licensed individuals who were the subject of a disciplinary action, typically an Order to Show Cause, filed by the Division of Securities long ago. Once these cases are filed by the Division the complaint and all subsequent filings are publicly available on the Division’s Database. Most people don’t know where to find that database, so that wouldn’t normally be much of a problem, but the contents of database are also indexed by Google and other search engines. Therefore, individuals and companies that have been the subject of a filing by the Division are frustrated when potential clients or investors see that old disciplinary action pop up on the first page of a Google search for their name. If they are no longer in the securities business that may not be a problem, but for licensed stock brokers and investment advisors it can be a big problem.
But now there is a solution! If you meet the criteria in the new law you can formally ask the Division to “remove the record of administrative disciplinary action from public access on the state-controlled website.” In order to qualify you must meet these criteria:
- Five years must have passed since your final order was issued (or if no final order was issued the clock starts on the date the administrative disciplinary action was commenced);
- You must have successfully completed all action required by the agency, such as paying the fine or completing a suspension;
- You cannot have violated the same statutory provisions or administrative rules that resulted in the original action; and
- You have to pay an application fee ($200).
That’s basically it (you can read the complete statute here). If you send in a request showing that you meet these criteria the administrative agency has to remove the record from its database.
WARNING: This is not the same thing as expungement. Even if you successfully remove your records from an agency’s database the disciplinary event will still need to be disclosed on your CRD, U-5, ADV or in a PPM. It still exists, it will just be harder to find. Also, administrative sanctions involving FINRA-licensed registered representatives and investment advisors will still be reported on your CRD which is readily available to the public through BrokerCheck.
Also, it’s worth noting that this new statute applies to all state agencies. So actions by the Departments of Insurance or Real Estate, or any other state agency that maintains an online database, can be eligible for removal as well.
Is this a good thing? Certainly it is a good thing for people who are compliant with the law but have been haunted by records from their administrative cases popping up when people search for their name online. Many people really do learn their lesson and change their behavior as a result of agency action.
I just hope it doesn’t result in more victims of fraud by serial offenders who might qualify for the removal simply because they haven’t been caught in the last 5 years. Serial fraudsters are definitely out there — just ask the victims of Scott Clark who convinced investors to give him $1.84 million while he was on supervised release for a 2012 guilty plea for conspiracy to commit bank fraud, money laundering and obstruction of justice.
It will be interesting to see whether the legislature will tweak this statute next year to give state agencies some discretion on whether to grant the request, but for now it is available to anyone who meets the criteria.
Copyright © 2016 by Mark W. Pugsley. All rights reserved.