C.R.S. § 11-51-606: Conduct of proceedings - cease-and-desist orders - consent orders - summary orders - issued by securities commissioner - rules.

(1) Any administrative proceeding under this article shall be conducted pursuant to the provisions of sections 24-4-104 and 24-4-105, C.R.S.; except that section 24-4-104 (3), C.R.S., shall not apply to any proceeding conducted pursuant to this article. Except as specified in paragraph (d) of subsection (1.5) or paragraph (e) of subsection (3) of this section, the securities commissioner shall refer the conduct of all hearings to an administrative law judge appointed pursuant to part 10 of article 30 of title 24, C.R.S., or a panel of the securities board in the discretion of the securities commissioner, based upon the complexity of the matter, number of parties to the matter, and legal issues presented in the matter. Every hearing in an administrative proceeding shall be public unless the securities commissioner, in the securities commissioner's discretion, grants a request joined in by all the respondents that the hearing be conducted privately.

(1.5) (a) (I) If the securities commissioner determines, based upon sufficient evidence as presented in a petition by an officer or employee of the division of securities, that a person has committed or may commit an act or practice listed in subsection (1.5)(b) of this section, then, in addition to any specific powers granted under this article 51, the securities commissioner may issue to the person a preliminary cease-and-desist order.

(II) A person that is the subject of a preliminary cease-and-desist order issued pursuant to subsection (1.5)(a)(I) of this section may request a hearing within fifteen days after the issuance of the preliminary cease-and-desist order to determine if the order should be made final. If the person that is the subject of the preliminary cease-and-desist order does not request a hearing within fifteen days after the date the preliminary cease-and-desist order was issued, the preliminary cease-and-desist order becomes a final cease-and-desist order. If the person that is the subject of the preliminary cease-and-desist order timely requests a hearing, the commissioner shall notify the chairperson of the securities board or an administrative law judge, who shall set a date within forty-five days after the issuance of the preliminary cease-and-desist order for the hearing on the preliminary cease-and-desist order before the securities board or administrative law judge as provided in subsection (1.5)(d) of this section.

(III) A person that is the subject of a preliminary cease-and-desist order issued pursuant to subsection (1.5)(a)(I) of this section shall obey the order until the order either becomes final in accordance with subsection (1.5)(a)(II) of this section or is vacated. The person that is the subject of a final cease-and-desist order shall obey the order.

(b) The securities commissioner may take action pursuant to paragraph (a) of this subsection (1.5) with regard to any of the following acts or practices:

(I) The sale of a security is subject to registration under this article and the security is being offered or has been offered or sold in violation of section 11-51-301, or any rule or order under said section;

(II) Any person has engaged or is about to engage in the offer or sale of a security or any other act or practice in violation of section 11-51-401 or any rule or order under said section;

(III) Any person has engaged or is about to engage in the offer or sale of a security or any other act or practice in violation of section 11-51-501 or any rule or order under said section;

(IV) Any person has engaged or is about to engage in any act or practice in violation of any provision of article 53 of this title; or

(V) Any person has violated or is about to violate any order previously entered by the securities commissioner.

(c) A person to whom a preliminary cease-and-desist order has been entered pursuant to subsection (1.5)(a) of this section shall be promptly notified by the division of securities of the entry of the order, along with a copy of the order, the factual and legal basis for the order, and a notice that the order will become final if the person does not request a hearing within fifteen days after the order is issued. The securities commissioner may serve the notice to the person that is the subject of the order by United States mail, postage prepaid, to the last-known address of the person, by personal service; by facsimile transmission; or as may be practicable. Mailing or facsimile transmission of an order or other documents under this subsection (1.5), or personal service of the order or associated documents, constitutes notice of the preliminary cease-and-desist order to the person.

(d) (I) If timely requested, a hearing on a preliminary cease-and-desist order shall be commenced within forty-five calendar days following the date of the preliminary cease-and-desist order. The hearing may be continued by agreement of all of the parties based upon the complexity of the matter, number of parties to the matter, and legal issues presented in the matter, but the hearing must commence no later than sixty calendar days following the request for a hearing.

(II) If a person against whom a preliminary cease-and-desist order has been issued pursuant to subsection (1.5)(a) of this section does not appear at a hearing, the preliminary cease-and-desist order becomes final without entering findings of fact or making conclusions of law.

(III) At a hearing held pursuant to this subsection (1.5)(d), the securities board or an administrative law judge shall, pursuant to the rules and procedures adopted by the securities commissioner, take evidence and hear arguments from the division of securities and the person against whom the preliminary cease-and-desist order has been issued. Based on the evidence entered and arguments heard at the hearing, the securities board or administrative law judge shall enter findings of fact, conclusions of law, and an initial decision recommending to the securities commissioner that a final order be entered affirming, denying, vacating, or otherwise modifying the preliminary cease-and-desist order. The initial decision must be issued within ten days after the conclusion of the hearing provided pursuant to this subsection (1.5)(d) and must be promptly delivered to the securities commissioner.

(IV) (Deleted by amendment, L. 2026.)

(V) The securities commissioner shall provide notice of a final order within ten calendar days after receiving the initial decision, in the manner set forth in subsection (1.5)(c) of this section, to each person against whom the order has been entered. The final order entered pursuant to this subsection (1.5)(d) is effective when issued and is a final order for purposes of judicial review pursuant to section 11-51-607.

(2) (a) Whenever it appears to the securities commissioner, based upon sufficient evidence presented to the securities commissioner in a stipulation between an officer or employee of the division of securities and any person, that such person has engaged in or is about to engage in any act or practice constituting a violation of any provision of this article, any rule promulgated pursuant to this article, or any order issued under this article, or any act or practice constituting grounds for administrative sanction under this article, the securities commissioner may issue a consent order against such person.

(b) In any consent order issued pursuant to this subsection (2), the securities commissioner may:

(I) Prohibit the respondent from any further violation of any provision, rule, or order under this article that is alleged in the stipulation to have been violated or from engaging in the conduct alleged in the stipulation as grounds for sanction under this article; and

(II) Impose conditions, limitations, or sanctions as stipulated.

(3) (a) If it appears to the securities commissioner, based upon sufficient evidence as presented in a petition by an officer or employee of the division of securities, that, in the case of a registration statement subject to the escrow provisions in section 11-51-302 (5) or (6), there has been a violation of such escrow provisions, or, in the case of any registration statement under section 11-51-304, any of the grounds specified in section 11-51-306 (1) exist, the securities commissioner may enter a summary stop order postponing or suspending the effectiveness of the registration statement.

(b) If it appears to the securities commissioner, based upon sufficient evidence as presented in a petition by an officer or employee of the division of securities, that sufficient grounds exist under section 11-51-310 (1), the securities commissioner may enter a summary order under section 11-51-310 (1)(b) suspending the exemption from securities registration under section 11-51-307 (1)(g) as to a specified security or issuer pending final determination of a proceeding under that section.

(c) No summary order may be entered pursuant to this subsection (3) unless the securities commissioner determines, in addition to the findings required under section 11-51-704 (2), that immediate issuance of such summary order is imperatively necessary for the protection of investors. An order issued pursuant to this subsection (3) is effective when entered and shall be accompanied by a brief statement of findings of fact and conclusions of law.

(d) Upon entering a summary order, the securities commissioner shall promptly notify each person against whom it has been entered of its entry and the basis therefor by providing to each such person at such person's last-known mailing address a copy of the order and the accompanying findings of fact and conclusions of law.

(e) (I) Any person against whom a summary stop order or summary order suspending exemption has been entered may make a written request to the securities commissioner that the matter be set for a hearing if such request is made within twenty-one calendar days after the date of entry of the order. Upon receipt of such request, the securities commissioner shall notify the chairperson of the securities board, and the chairperson shall set a date for a hearing within twenty-one days to determine whether to continue the summary order.

(II) Any such hearing before the securities board shall be conducted pursuant to the provisions of section 24-4-105, C.R.S. Following the hearing, the securities board shall issue its initial decision, accompanied by findings of fact and conclusions of law. The securities commissioner shall then enter a decision that shall be a final order for purposes of judicial review pursuant to section 11-51-607.

(III) If the securities commissioner does not receive a request for a hearing pursuant to subparagraph (I) of this paragraph (e), the order shall become final twenty-one calendar days after the entry of such order.

(4) (a) (I) If the securities commissioner determines that any of the grounds specified in section 11-51-410 (1) exist as to a licensed person or, in the case of a licensed broker-dealer, a partner, officer, director, person occupying a similar status or performing similar functions, or a person directly or indirectly controlling a broker-dealer, the securities commissioner may issue pursuant to section 24-4-104 (4) an order to summarily suspend the license of that person or limit or impose conditions on the securities activities of that person.

(II) A person that is the subject of a summary suspension may request a hearing to determine if the suspension should be made a final order of suspension if the request is made within fifteen days after the date the license was summarily suspended. If the person that is the subject of the summary suspension does not request a hearing within fifteen days after the date the license was summarily suspended, the summary suspension becomes a final order of suspension. If the person that is the subject of the summary suspension timely requests a hearing, the securities commissioner shall promptly notify the chairperson of the securities board that a license has been summarily suspended and a hearing has been requested, and the chairperson shall set a date for a hearing on the order before the securities board.

(III) The person that is the subject of an order summarily suspending a license shall obey the order until the order either becomes final in accordance with subsection (4)(a)(II) of this section or is vacated. The person that is the subject of a final order of suspension shall obey the order.

(b) A person whose license has been summarily suspended shall be promptly notified by the division of securities of the suspension and the basis for the suspension. The notice must include a copy of the summary suspension order and a statement that the order will become final if the person that is the subject of the order does not request a hearing within fifteen days after the order is issued. In the case of a broker-dealer, the notification shall be sent both to the broker-dealer's last-known mailing address and, if different, the most current mailing address the broker-dealer has on file with the securities commissioner as required in section 11-51-407 (3). In the case of a sales representative, the notification must be sent to the sales representative's last-known mailing address, the most current mailing address the sales representative has on file with the securities commissioner as required in section 11-51-407 (3), and the last-known mailing address of the broker-dealer or issuer for which the sales representative is licensed to act.

(c) (I) If requested, a hearing on a summary suspension shall be commenced within forty-five calendar days following the date the order was issued.

(II) The securities board shall take evidence and hear arguments from the division of securities and the person whose license has been summarily suspended pursuant to subsection (4)(a) of this section. If the person that is the subject of a summary suspension order does not appear at the summary suspension hearing, the order becomes final without entering findings of fact or making conclusions of law.

(III) Based on the evidence entered and arguments heard at the hearing held pursuant to subsection (4)(a) of this section, the securities board shall enter findings of fact, conclusions of law, and its initial decision recommending to the securities commissioner that a final order be entered vacating the summary suspension, converting it to a final suspension, or otherwise limiting or imposing conditions on the securities activities of that person. Exceptions to the initial decision of the securities board must be filed with the securities commissioner within ten calendar days after the date of entry of the securities board's initial decision. The securities commissioner shall then issue an order, which is a final order for purposes of judicial review pursuant to section 11-51-607.

(d) A final order entered under subsection (4)(c)(III) of this section suspending a license or otherwise limiting or imposing conditions on the securities activities of a licensed person remains in effect during the pendency of a proceeding under sections 24-4-104 and 24-4-105, unless vacated or modified on judicial review pursuant to section 11-51-607 or by subsequent order of the securities commissioner after notice and opportunity for hearing.

(5) The securities commissioner shall commence a proceeding under sections 24-4-104 and 24-4-105 promptly following the entry of an order under subsection (3)(b) or (3)(c) of this section or of a final summary suspension order under subsection (4)(a) of this section.

(6) The securities commissioner may promulgate a rule that defines what constitutes prompt filing and notification pursuant to this section.