Introduction
Imagine you start a promising investment venture flipping houses but lack the startup capital. Instead of taking a loan, you approach four longtime friends for $25,000 each, assuring them that the “market is hot” and they will double their investment within a year. Nothing is put in writing. No filings are made with the Utah Division of Securities.
When the project fails to produce returns, your friends report the situation to the Division. Shortly afterward, you receive a “show cause” letter. What does this mean—and what happens next?
This guide explains the Utah Division of Securities administrative hearing process, what laws apply, potential penalties, and why legal representation is critical.
What Is a Securities Administrative Hearing in Utah?
Under Utah Code § 61-1-20, if the Division’s director believes someone has violated or is currently violating the Utah Uniform Securities Act, the director may issue an Order to Show Cause. This order requires the recipient to appear before the Securities Commission and explain why enforcement action should not be taken.
The order must include:
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The reasons for the action
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The alleged violations
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The date and time of the hearing (No earlier than 10 business days after issuance)
Types of Hearings
Utah recognizes two categories of administrative hearings: informal and formal.
a) Informal Hearings
Informal adjudicative proceedings are authorized under Utah Code § 63G-4-202. The Division may classify certain matters as informal when:
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No statutory procedure is violated
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Informal processes still protect the parties
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Efficiency is improved
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A formal hearing would be unnecessarily costly relative to public benefit
Informal hearings are simpler, require less procedure, and are often used for smaller or straightforward violations.
b) Formal Hearings
Formal adjudicative proceedings follow Utah Code § 63G-4-206. These hearings resemble a courtroom trial and include:
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A presiding hearing officer
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Representation by the Utah Attorney General’s Office
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Presentation of evidence
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Witness testimony and cross-examination
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Objections
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Opening and closing statements
Formal hearings are typically reserved for more serious or complex alleged violations.
What Will the Hearing Address?
The hearing may cover any alleged violation of the Utah Uniform Securities Act, but the most common issues include:
a) Fraud or Misrepresentation (§ 61-1-1(2))
This includes:
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Making untrue statements of material fact
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Omitting important information that would affect an investor’s decision
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Promising unrealistic or unsubstantiated returns
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Failing to disclose risks or financial details
Your scenario—promising doubled returns without documentation or disclosures—could fall into this category.
b) Selling an Unregistered Security (§ 61-1-7)
Many people don’t realize their investment opportunity is legally considered a security. This can include:
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Raising money without filing an exemption
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Failing to file a notice of a private offering
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Investment contracts
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Promissory notes
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Real-estate investment funds or pooled capital ventures
If you're raising money for a project—even from friends—you may be offering a regulated security.
Can a Utah Securities Violation Become Criminal?
Yes.
Under Utah Code § 61-1-21(a):
“A person is guilty of a third-degree felony who willfully violates a provision of the Utah Uniform Securities Act.”
Criminal prosecution is handled separately from the administrative hearing and may involve:
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Felony charges
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Jail or prison time
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Fines
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Restitution orders
The State of Utah treats securities violations very seriously, especially when investor losses occur.
Do You Need a Lawyer for a Utah Securities Hearing?
Absolutely.
Securities laws are complex, and administrative hearings require significant preparation, legal analysis, and strategic defense. Having an experienced attorney can help you:
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Respond appropriately to the “show cause” order
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Gather and present evidence
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Navigate Division procedures
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Minimize penalties or negotiate resolutions
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Protect against potential criminal exposure
If you’ve received a notice or expect one, legal representation should be your first step.
Contact Our Office
If you are involved in a Utah securities investigation or administrative hearing, our office can help.
Phone: 801-373-6345
Learn More About Criminal Defense Lawyer Jake Gunter
For additional insights on Criminal Defense Law and to get to know Jake Gunter better, check out these helpful videos:
- Meet Jake Gunter – Learn more about Jake Gunter's background, experience, and dedication to helping clients throughout Utah.
- How to Choose a Utah Personal Injury Attorney – This video offers guidance on selecting the right personal injury attorney to ensure you receive effective representation.
- What Jake Gunter Does and Who He Represents – Discover the types of cases Jake Gunter handles and how he advocates for the rights of injured individuals statewide.
These resources will provide you with valuable information as you consider your legal options. For any questions or to schedule a free consultation, feel free to reach out to us directly.