When Is Filing a Governmental Complaint Concerning a Securities Fraud Beneficial?

This article examines two questions often confronted by Arizona investors who believe they have been defrauded in connection with a securities transaction.

There are procedures for submitting a complaint to state agencies and law enforcement officials.

Care should be used to determine when such complaints are helpful and when they are not to a victim of a securities fraud.

If an investor wishes to pursue a civil claim against a defendant, a prior regulatory complaint can pose impediments to such a claim. For example, in discovery a defendant will often inquire whether a plaintiff has made any regulatory complaints to governmental authorities and request copies thereof. If a complaint has been made, and governmental agencies have not yet taken action, the defendants might argue that the fact that no governmental agency has acted on the investor’s complaint is a reflection that the complaint has no merit. On the other hand, if enforcement action is taken by the regulatory agency it may result in the defendants’ assets being frozen or the defendant being put out of business which is often not conducive to the investors’ primary objective of obtaining a settlement from the defendant.

Further, investors often do not realize the legal significance of various facts and may inadvertently miscommunicate a key fact in a way that has adverse legal significance to a potential civil claim. Finally, filing a regulatory complaint is an action that can cause a defendant who might otherwise be willing to settle a dispute resolve to fight the civil claim to its full conclusion in order to “vindicate” their reputation. Thus, a regulatory complaint can sometimes cause a defendant to not settle when they otherwise might be agreeable to a settlement.

Where a regulatory complaint can be a good option is where the defendants appear uncollectable or where there are other legal or practical impediments to pursuing a civil claim. In those instances, a regulatory action, if brought, against the defendant may be the only way of effectuating any justice in the face of a fraud.

The following summarizes how to submit a complaint to the Arizona Corporation Commission Securities Division, the Arizona Attorney General’s office and to the Maricopa County Attorney’s office if an investor believes they have been the victim of an investment or financial fraud.

Complaints may be filed with the Arizona Securities Division via e-mail to SecuritiesDiv@azcc.gov, or by mail to:

Complaints

Securities Division

Arizona Corporation Commission

1300 W. Washington St., 3rd Floor

Phoenix, AZ 85007

(602) 542-0662

A complaint form, as provided on the Arizona Securities Division’s website, should be submitted via e-mail or mail along with copies of relevant documents.

The following information is identified on the Arizona Securities Division website as necessary to include in a complaint:

1. Names, addresses, telephone numbers, and other identifying information for any person or entity you mention in your complaint. 

2. Details of any transaction or activity you think violates the Arizona Securities or Investment Management Acts. Present the events in the order in which they happened, using dates whenever possible. 

3. Copies of documents, listed above, relating to the transaction that is the subject of your complaint. 

4. Signed declaration as to truth and accuracy of your complaint.

Consumer complaints may be submitted to the Arizona Attorney General’s office online) or mailed to the following address:

Consumer Information and Complaints

Attorney General's Office

2005 N. Central Ave.

Phoenix, Arizona 85004-2926

(602) 542-5763

Complaints are submitted using the Consumer Complaint Form, as provided on the Attorney General’s website. See AZ Atty General – Complaint Form (online) and AZ Atty General – Complaint Form (by mail). The form requests information, such as (1) the party or firm you are complaining against (name, address, phone number and e-mail); (2) an explanation of the entire circumstances surrounding the complaint; (3) whether or not the complaint was made to the firm/agency/business; (4) if any documents signed, etc.

If one prefers to submit a written complaint by mail, versus an online submission, the following tips are provided online for drafting the written complaint:

1. First, make a separate list of the things you want to say. Try to separate your feelings from the facts. Present the events in the order in which they happened, using dates whenever possible.

2. Type or print legibly in BLACK ink.

3. Enclose copies of documents such as contracts, letters, advertisements, sales slips, PROOF OF PAYMENT, warranties, papers or other documents that may support your complaint. KEEP THE ORIGINALS FOR YOUR FILES.

4. Remember that your complaint should describe the event or practice which was misleading to you. If possible, you should state why the practice was misleading.

Once the Attorney General’s office receives the complaint, “a member of [their] legal staff will review [it] and contact the company involved (if necessary). This process may take from two to eight weeks, depending on the circumstances…”

A review of the Maricopa County Attorney’s website does not provide specific information on submitting complaints, including those regarding investment or financial fraud. At the present time, the Maricopa County Attorney’s office does not have a process to accept complaints regarding investment or financial fraud. Complaints of this nature are directed to the Arizona Attorney General’s office.

Not every matter is best solved by a regulatory complaint. Care should be given to determine whether potential claims should be pursued in a civil suit in court or in arbitration, and whether a regulatory complaint will hinder a private legal proceeding. In other situations, a regulatory complaint alone may be the only cost effective approach available.