December 29, 2016
Gerald Rome, Securities Commissioner for the State of Colorado, Plaintiff-Appellee,
Mark Mandel and Wall Street Radio, Inc., d/b/a Winning on Wall Street, Defendants-Appellants.
and County of Denver District Court No. 14CV34131 Honorable
Shelley I. Gilman, Judge
AFFIRMED IN PART, VACATED IN PART, AND REVERSED IN PART, AND
CASE REMANDED WITH DIRECTIONS
Cynthia H. Coffman, Attorney General, Russell B. Klein,
Deputy Attorney General, Sueanna P. Johnson, Assistant
Attorney General, Denver, Colorado, for Plaintiff-Appellee
& Keller, P.C., David Zisser, Denver, Colorado, for
Vorndran Shilliday, P.C., Paul Vorndran, Denver, Colorado;
Zachary Knepper, Washington, D.C., for Amicus Curiae North
American Securities Administrators Association, Inc.
1 The Securities Commissioner of Colorado, Gerald Rome,
brought this civil enforcement action under the Colorado
Securities Act (CSA), §§ 11-51-101 to -908, C.R.S.
2016, against defendants, Marc Mandel and Wall Street Radio,
Inc. d/b/a Winning on Wall Street (WSR). The Commissioner
alleged that defendants had transacted business as investment
advisers or investment adviser representatives without a
license or exemption from licensure. According to the
Commissioner, they did so by: (1) responding to direct
investment questions from clients through a service called
"crystal ball readings"; and (2) effectively
executing securities trades on behalf of their clients
through a practice known as "auto-trading."
2 The trial court entered summary judgment in favor of the
Commissioner, holding that defendants could not engage in
those activities without a license. As a result, the court
imposed a permanent injunction and entered a restitution
order against defendants.
3 On appeal, defendants raise three novel questions. First,
by acting as a so-called "lead trader" for an
auto-trading platform, does one act as an investment adviser
required to be licensed under the CSA? Second, if so, is this
licensing requirement consistent with the actor's First
Amendment rights? Third, may the Commissioner seek as
restitution the fees paid by the unlicensed investment
advisor's clients? The answer to all three questions is
"yes." Therefore, we affirm the summary judgment
and the restitution order. But we vacate the injunction in
part and reverse it in part. And we remand with directions.
Factual and Procedural History
4 The trial court recognized, and the record confirms, the
following undisputed facts. Defendants, based in Boulder,
Colorado, hosted a radio show devoted to securities and
investments. They also maintained a website offering a
variety of investment-related services under two membership
plans: the Master Membership Plan and the Lead Trader
5 Subscribers to the Master Membership Plan paid $500
annually to receive defendants' electronic newsletter,
daily trading ideas, seminars, online access to
defendant's trading system and portfolio, and - as
relevant to this case - the opportunity to call or e-mail
Mandel twice a week with questions about specific stocks
(called "crystal ball readings"). Subscribers to
the Lead Trader Membership Plan paid between $1000 and $2000
annually to receive the Master Membership Plan services and
the opportunity to mimic Mandel's own security trades
through an investment vehicle known as auto-trading.
6 Auto-trading is a system whereby investors (the followers)
mimic the trades of a single investor (the lead trader).
See Sec. & Exch. Comm'n v. Terry's Tips,
Inc., 409 F.Supp.2d 526, 529-30 (D. Vt. 2006). All
investors - lead trader and followers alike - open separate
accounts with a broker-dealer that provides an auto-trading
platform. The lead trader then grants followers permission to
mimic his or her trades. Finally, followers authorize the
broker-dealer to execute the same transactions in their
accounts as those of the lead trader. Consequently, when the
lead trader initiates a transaction for his or her account,
the broker-dealer automatically executes the same transaction
in the followers' accounts, without need for further
instruction or approval. Followers are often not aware of the
trades until after they have occurred. Id. at 530.
7 Mandel and his Lead Trader Membership subscribers employed
as the broker-dealer a company called Ditto Trade, which
provides an online auto-trading platform through its
website.Under the Ditto Trade model, a follower may
choose certain controls limiting the extent to which the
follower's account mimics the lead trader's
transactions (e.g., the follower can exclude identified
securities from being traded or limit the investment amount
that will follow the lead trader's transactions).
Alternatively, the follower can select the "ditto
all" or "full throttle" option, wherein the
follower's entire investment account may be used to buy
and sell securities in the same proportion as that of the
8 Ditto Trade requires lead traders to attest that they are
either registered investment advisers or are exempt from
registration. Mandel attested to operating within an
Prior Administrative Action
9 Neither Mandel nor WSR has ever been licensed in Colorado
as an investment adviser or investment adviser
representative. Mandel's earlier attempt to gain such a
license resulted in an administrative action before the
Commissioner in 2008. Mandel allegedly failed to make
complete and accurate disclosures in his application
materials; he did not disclose: (1) a nondischarged
bankruptcy; (2) a number of judgments, arbitration matters
brought by former clients, and a California regulatory action
brought against his insurance license; and (3) his discipline
by the National Association of Securities Dealers.
10 The administrative action ended in a stipulated consent
order. Therein, the Commissioner denied Mandel's
application, precluded him from reapplying for ten years, and
barred him from acting as a solicitor or otherwise
associating with any Colorado licensed investment adviser or
"federal covered" adviser.
11 The Commissioner initiated the present district court
action against Mandel and WSR in October 2014. The
Commissioner alleged that defendants had acted as unlicensed
investment advisers or investment adviser representatives,
contrary to CSA section 11-51-401(1.5), C.R.S. 2016.
Specifically, defendants managed clients' securities
transactions through the auto-trading platform, and
defendants provided "direct-to-client" advice
through bi-weekly crystal ball readings. Defendants responded
that they were exempt from licensure under the
"newsletter exclusion" set forth in section
11-51-201(9.5)(b)(III), C.R.S. 2016.
12 Discerning no genuine issue of material fact, the trial
court granted summary judgment against defendants. The court
noted that, although defendants "may have engaged in
some exempt publishing activities, they provided personalized
money management for which a license is required."
Specifically, defendants used the lead trader service to
provide information to followers "as to the advisability
of purchasing and selling securities through the trades in
[their] own accounts, " and defendants used the crystal
ball service to provide "individual advice regarding the
advisability of buying and selling securities to
clients." The court concluded that this conduct
"squarely met the definition of investment adviser and
investment adviser representative, " as provided under
section 11-51-201(9.5)(a)(I) and (9.6)(a), and that
defendants did not qualify for any exemption from the
13 The court entered a permanent injunction under section
11-51-602(1), C.R.S. 2016 - effectively barring defendants
from any involvement in the securities industry in Colorado -
and directed them to pay $80, 000 in restitution, reflecting
$1000 for each auto-trading subscriber.
14 Defendants contend that the trial court erroneously
entered summary judgment against them for two reasons. First,
defendants argue that a genuine issue of material fact exists
as to whether they acted as investment advisers or investment
adviser representatives. Second, they assert that summary
judgment was inappropriate because the Commissioner failed to
controvert defendants' affirmative defense that the First
Amendment of the Federal Constitution and article II, section
10 of the Colorado Constitution barred this enforcement
Standard of Review and Summary Judgment Principles
15 We review de novo an order granting summary judgment.
People v. Wunder, 2016 COA 46, ¶ 13. In de novo
review, we do not defer to the trial court's view of the
written filings or any other documentary evidence, but
instead we consider them anew. See Ringquist v. Wall
Custom Homes, LLC, 176 P.3d 846, 849 (Colo.App. 2007).
¶ 16 A court may not grant summary judgment except on a
clear showing that no genuine issue exists as to any material
fact and that the moving party is entitled to judgment as a
matter of law. C.R.C.P. 56(c); Churchey v. Adolph Coors
Co., 759 P.2d 1336, 1339-40 (Colo. 1988). A material
fact is one that "will affect the outcome of the
case." People in Interest of S.N., 2014 COA
116, ¶ 23 (quoting Dominguez Reservoir Corp. v.
Feil, 854 P.2d 791, 795 (Colo. 1993)).
17 The moving party bears the initial burden of production to
show that no genuine issue of material fact exists, and a
court must resolve all doubts as to the existence of such an
issue against the moving party. Churchey, 759 P.2d
at 1340. If the moving party would not bear the burden of
persuasion at trial, the moving party must show an absence of
evidence in the record to support the nonmoving party's
case. Cont'l Air Lines, Inc. v. Keenan, 731 P.2d
708, 712 (Colo. 1987).
18 If the moving party meets its burden, the burden shifts to
the nonmoving party to establish that a genuine dispute of
material fact exists. Id. at 713; S.N.,
¶ 27. In that event, "an adverse party may not rest
upon the mere allegations or denials of the opposing
party's pleadings, but the opposing party's response
by affidavits or otherwise . . ., must set forth specific
facts showing that there is a genuine issue for trial."
Burden of Production
19 With his motion for summary judgment, the Commissioner
submitted an array of evidence supporting his claims: e-mail
communications between Mandel and clients that constituted
crystal ball readings; a spreadsheet listing defendants'
auto-trading followers on Ditto Trade; communications and
paperwork between Mandel and Ditto Trade personnel (e.g.,
auto-trading platform descriptions, Mandel's attestation,
consulting agreements); the 2008 consent order between Mandel
and the Commissioner; a letter to the Colorado Attorney
General from Ditto Trade's general counsel describing the
services afforded by the auto-trading platform;
defendants' responses to discovery requests; and
defendants' advertisements for their services. In
response, defendants submitted three exhibits: their first
set of discovery requests, an affidavit by their attorney
regarding the Commissioner's failure to confer in advance
of filing his motion for summary judgment, and the letter
from Ditto Trade's general counsel describing its
20 Defendants identify only one disputed fact: whether they
based their services on their subscribers' individual
portfolios or specific investment needs. As we shall explain,
however, that fact does not affect the outcome of this case.
21 Defendants' other contentions raise matters of law
(e.g., whether this enforcement action violates the First
Amendment). But those contentions do not suggest that
additional material evidence exists which contradicts the
Commissioner's evidence. The record and the briefs
reveal, therefore, that the Commissioner presented undisputed
facts sufficient to resolve this case, including
defendants' affirmative defense. Accordingly, we turn to
whether the Commissioner is entitled to judgment as a matter
22 Section 11-51-401(1.5) provides that "[a] person with
a place of business in this state shall not transact business
in this state as an investment adviser or investment adviser
representative unless such person is licensed as such or
exempt from licensing under section 11-51-402." (No one
suggests that section 11-51-402, C.R.S. 2016, applies here.)
An "investment adviser" includes, as relevant here,
any person who, for compensation, engages in the business of
advising others, either directly or through publications or
writings, as to the value of securities or as to the
advisability of investing in, purchasing, or selling
securities, or who, for compensation and as part of a regular
business, issues or promulgates analyses or reports
§ 11-51-201(9.5)(a)(I). An "investment adviser
representative" means, as relevant here, one who is a
partner, officer, or director of an investment adviser; or
who is employed or otherwise associated with an investment
adviser; and who makes recommendations or otherwise renders
advice to clients regarding securities, manages securities
accounts or portfolios for clients, or determines which
recommendation or advice regarding securities should be given
to clients. § 11-51-201(9.6)(a).
23 But an "investment advisor" does not include:
(II)A publisher of a bona fide newspaper, magazine, or
business or financial publication with a regular paid
(III)A publisher of a securities advisory newsletter with a
regular and paid circulation who does not provide advice to
subscribers on their specific investment situations[.]
§ 11-51-201(9.5)(b). These provisions form the so-called
"publishers exclusion" or "newsletter
exclusion" from the basic definition of an investment
adviser. This case turns on whether this exclusion exempts
defendants from licensure.
24 The General Assembly modeled the CSA's regulation of
investment advisors on the 1956 Uniform Securities Act and
1985 Revised Uniform Securities Act. These uniform acts were
designed to be consistent with the Federal Investment
Advisers Act of 1940, 15 U.S.C. §§ 80b-1 to 80b-21
(2012), and the United States Supreme Court's
interpretation of that act. Revised Unif. Sec. Act of 1985
§ 101 cmt. 8 (amended 1988), 7C U.L.A. 228 (2006). In
fact, the CSA's basic definition of investment advisor is
identical to the federal act's definition. See
15 U.S.C. § 80b-2(a)(11) (2012).
25 Because the CSA's regulation of investment advisers
largely parallels the federal act's provisions,
"federal authorities are highly persuasive."
Lowery v. Ford Hill Inv. Co., 192 Colo. 125, 129-30,
556 P.2d 1201, 1204 (1976); Rome v. HEI Res., Inc.,
2014 COA 160, ¶ 19; see also §
11-51-101(3), C.R.S. 2016 ("The provisions of this
article and rules made under this article shall be
coordinated with the federal acts and statutes to which
references are made in this article[.]"); §
11-51-402(5)(a)(I) (referring to the Federal Investment
Advisers Act of 1940 when discussing exemptions from
registration for investment advisers); Joseph v. Equity
Edge, LLC, 192 P.3d 573, 578-79 (Colo.App. 2008)
(relying on federal authority to determine whether defendants
acted as investment advisers for purposes of CSA).
26 For these reasons, the trial court and the parties have
properly focused on the seminal case of Lowe v.
Securities & Exchange Commission, 472 U.S. 181
(1985). In Lowe, the Supreme Court considered
whether the Securities and Exchange Commission (SEC) could
obtain an injunction forbidding the publication of a
financial newsletter by unregistered parties. Id. at
183. Although the Court granted review to determine whether
the First Amendment (particularly its protection of the free
press) prohibited the injunction, the Court ultimately
resolved the case on statutory grounds. Id. at
188-90, 211. The Court interpreted the Investment Advisers
Act in a manner that avoided the constitutional question -
that is, the Court adopted a construction of the statute that
rendered it clearly valid under the constitution. See
id.; see also Crowell v. Benson, 285 U.S. 22,
76 (1932) (Brandeis, J., dissenting) ("[W]here a statute
is equally susceptible of two constructions, under one of
which it is clearly valid and under the other of which it may
be unconstitutional, the court will adopt the former
construction."); Jolly v. People, 742 P.2d 891,
897 (Colo. 1987) (same).
27 In particular, the Court construed the statutory exemption
for bona fide publications broadly and concluded that the
petitioners fell within that exclusion. The Court
The legislative history plainly demonstrates that Congress
was primarily interested in regulating the business of
rendering personalized investment advice, including
publishing activities that are a normal incident thereto. On
the other hand, Congress, plainly sensitive to First
Amendment concerns, wanted to make clear that it did not seek
to regulate the press through the licensing of
nonpersonalized publishing activities.
Lowe, 472 U.S. at 204. Thus, as long as the
communications between the publisher and subscribers are
entirely impersonal and do not develop into the kind of
fiduciary, person-to-person relationships that were discussed
in the legislative history of the federal act and that are
characteristic of investment adviser-client relationships,
the publications are, at least presumptively, within the
exclusion and not subject to registration. Id. at
28 After concluding that the Lowe petitioners met
the basic definition of investment adviser, the Court
examined the language of the statutory exclusion for bona
fide publications to determine whether the petitioners were
nonetheless not subject to regulation (i.e., whether their
activities were "nonpersonalized"). See
id. at 203-04, 208-09; see also Sec. & Exch.
Comm'n v. Park, 99 F.Supp.2d 889, 894 (N.D. Ill.
2000) ("[W]hether or not a publication is personalized
for purposes of the Advisers Act is determined in large part
by whether or not the publication can fall into an exclusion
for nonpersonalized or general publications."). The
federal act's exclusion applies to "the publisher of
any bona fide newspaper, news magazine or business or
financial publication of general and regular
circulation." 15 U.S.C. § 80b-2(a)(11)(D).
29 The Court interpreted a "bona fide" publication
to mean "genuine in the sense that it would contain
disinterested commentary and analysis as opposed to
promotional material disseminated by a 'tout.'"
Lowe, 472 U.S. at 206. The Court interpreted
"regular" as meaning "offered . . . on a
regular schedule, " as opposed to being "timed to
specific market activity, or to events affecting or having
the ability to affect the securities industry."
Id. at 206, 209. If a publication meets these
requirements (among others), the publisher's
communication is not sufficiently personalized for
regulation. Id. at 206-09; see also Park,
99 F.Supp.2d at 895-96. Conversely, if the publisher's
activities fail to satisfy any of these requirements - and
the publisher otherwise comes within the basic definition of
investment adviser - the publisher must register as an
30 The trial court determined that defendants met the basic
definition of an "investment adviser" and/or
"investment adviser representative" under the CSA.
See § 11-51-201(9.5)(a)(I), (9.6)(a).
Defendants offer no contrary argument. And the undisputed
facts show that defendants engaged in the business of
advising others as to the buying and selling of securities
through indirect communications (e.g., daily stock ideas and
webinars), with direct communications (crystal ball
readings), and by providing paying subscribers the
opportunity to mimic Mandel's investment transactions
through auto-trading. See also In the Matter of Weiss
Research, Inc., Investment Advisers Act Release No.
2525, 88 SEC Docket 810, 2006 WL 1725099, at *5 (June 22,
2006) (reflecting the SEC's conclusion that acting as a
lead trader on an auto-trading platform meets the basic
definition of an investment adviser under the Federal
Investment Advisers Act).
31 In sum, to avoid the licensing requirement, defendants
must fall within an exclusion to the basic definition of
investment adviser. Cf. Park, 99 F.Supp.2d at 895.
As noted, they rely on the publishers or newsletter
exclusion. See § 11-51-201(9.5)(b)(II)-(III).
To avail themselves of these protections, defendants'
services at issue - the lead trader service and crystal ball
readings - must qualify as bona fide publications or
newsletters with a regular circulation. See id.
32 Defendants disseminated investment advice under their lead
trader service by effectively exercising discretion over part
or all of their subscribers' accounts with Ditto Trade.
For the following three reasons, this investment advice did
not meet all requirements of either section
11-51-201(9.5)(b)(II) or section 11-51-201(9.5)(b)(III). The
advice, therefore, was sufficiently personalized to require a
license under the CSA, regardless of whether defendants based
the advice on the subscribers' individual portfolios or
33 First, the lead trader services did not take the form of a
"publication" or "newsletter" generally
disseminated to subscribers. Defendants do not contend
otherwise. Instead, they assert that, because they offered a
newsletter with the subscriptions, all of their other
services - including the lead trader service - fall within
the safety net of section 11-51-201(9.5)(b)(II)-(III). But
accepting this assertion would prove too much. Merely
publishing a newsletter allegedly compliant with the
exclusion does not give the publisher carte blanche to offer
other services that do not satisfy the exclusion and
would require an investment adviser license. "Regardless
of whether the Defendants as publishers of a financial
newsletter of general and regular circulation are excluded
from the definition of investment adviser, the question
remains whether the Defendants' other activities bring
them within the definition." Terry's Tips,
409 F.Supp.2d at 532; cf. Lowe, 472 U.S. at 204
("Congress did not intend to exclude publications that
are distributed by investment advisers as a normal part of
the business of servicing their clients."); id.
at 208-09 (holding that petitioners' newsletters
satisfied the publishers exclusion because "they are
published by those engaged solely in the publishing
business and are not personal communications masquerading in
the clothing of" the press) (emphasis added).
34 Second, defendants' lead trader service was not
"bona fide" because it did not consist of
disinterested commentary or analysis. To the
contrary, each follower's investment decision was
directly linked to Mandel's investment account. Thus,
Mandel could personally benefit from his followers'
decisions to mimic his investment decisions. Cf.
Lowe, 472 U.S. at 209 (concluding that petitioners
satisfied the publishers exclusion because the SEC did not
suggest that their publications "were designed to tout
any security in which petitioners had an interest").
Therefore, the service does not satisfy section
35 Third, the lead trader service was not
"regular." The investment transactions (each of
which constituted a unit of advice to the subscriber) did not
follow a routine schedule. Instead, sporadic or specific
market activity motivated Mandel's trading signals in the
lead trader program, according to defendants' own
advertisements for the service. Cf. Lowe, 472 U.S.
at 209 (recognizing that petitioners' publications were
"regular" in the sense that they were not
timed to specific market activity). Indeed, the SEC has
considered a similar auto-trading service and concluded that
the lead trader did not meet the federal act's publishers
exclusion from investment adviser registration. Weiss
Research, Inc., 2006 WL 1725099, at *5. The SEC
explained that the lead trader "was engaged in the
business of advising others as to the buying and selling of
securities in response to market activity" and
"effectively had investment discretion to purchase and
sell securities on behalf of its auto-trading
subscribers." Id. (emphasis added).
Consequently, defendants' service here did not enjoy the
safe harbor of section 11-51-201(9.5)(b)(III).
36 In the end, because defendants' lead trader service
did not qualify for the publishers exclusion - and thus was
sufficiently personalized to require licensure -
defendants' provision of this service for compensation
without an investment adviser's license violated section
Crystal Ball Readings
37 In the crystal ball readings, defendants directly
responded to requests for advice about specific investment
transactions. We assume without deciding that these responses
qualified as "bona fide" and either
"publications" or "newsletters" for
purposes of section 11-51-201(9.5)(b)(II) and (III). Still,
the record reveals that this paid service also failed to meet
the publishers exclusion; so, the service was sufficiently
personalized for regulation under the CSA.
38 Defendants' crystal ball service did not qualify as
"regular." The communications arose from sporadic
questions posed by individual subscribers based on specific
market activity, using the ticker symbols of particular
companies. And defendants offered answers in response to
specific investment situations. For example:
• A subscriber e-mailed defendants, asking, "What
are you advising your members to do regarding AFFY. Was there
any news causing this drop?" Mandel responded: "No
idea why it is so weak. But definitely a sell signal on the
15 minute chart. I sold out of my lead trader portfolio early
this morning. If it bounces today, sell!"
• A subscriber wrote, "Also, I'm stuck in
ISIS[.] I'm going to buy under 30 bucks somewhere and
hope for a[n] upswing back to $32.00. Any advise [sic] would
be great here." Mandel told him: "Hold ISIS."
• A subscriber asked: "Would you buy, sell or hold
EGHT?" Mandel replied: "EGHT - Great chart. Could
pullback if market pulls back. Maybe sell half."
39 Because defendants' paid service consisted of direct
responses to investment questions timed to specific market
activity, the service was not regular within the meaning of
the publishers exclusion.
40 According to the undisputed facts, defendants provided
personalized investment advice to their subscribers by:
effectively executing discretionary securities trades on
behalf of their clients as a lead trader on an auto-trading
responding to direct investment questions from clients
through a service called crystal ball readings. Under the
circumstances of this case, the question whether defendants
rooted their advice in a client's particular portfolio or
specific investment needs is immaterial because that disputed
fact does not affect the outcome. Because defendants provided
these services for compensation without a license as
investment advisers or investment adviser representatives,
they violated section 11-51-401(1.5).
41 Recall that, in opposing the Commissioner's summary
judgment motion, defendants asserted as an affirmative
defense that the Federal Constitution and the Colorado
Constitution barred this enforcement action. Defendants do
not argue that the Colorado Constitution provides greater
protections than the Federal Constitution on this point. And
defendants focus on the First Amendment implications of
regulating persons who issue financial newsletters or similar
42 Defendants maintain that, because the Commissioner did not
"controvert" this affirmative defense in his
summary judgment materials, the summary judgment must be set
aside. But this argument fails because they do not identify
any material factual dispute precluding resolution of the
First Amendment issue on this record as a matter of law.
43 As discussed, Congress, when enacting the analogous
Federal Investment Advisers Act, sought to regulate
investment advice without infringing on the constitutional
freedom of the press. Recognizing this intention, the Supreme
Court in Lowe construed the federal act to comport
with the First Amendment. Specifically, the Court interpreted
the federal act's exclusion for bona fide publications in
a way that accommodated these constitutional concerns.
See Lowe, 472 U.S. at 190, 204, 211.
44 Defendants cite no authority holding that regulating
investment advisers within Lowe's boundaries
violates the First Amendment. Nor have we found any. Therefore,
because we have applied the CSA and its publishers exclusion
consistently with Lowe's analysis, application
of the CSA to defendants under this analysis does not raise
constitutional problems. Because defendants' services at
issue were sufficiently personalized under Lowe to
treat defendants as investment advisers or investment adviser
representatives, requiring them to obtain a license as a
condition of providing those services is constitutional.
45 For all of these reasons, we affirm the summary judgment
in favor of the Commissioner.
46 After determining that defendants had violated the CSA,
the trial court imposed restitution and a permanent
injunction against them. They appeal both remedies. We first
47 The Commissioner sought restitution in the form of
subscribers' fees for enrollment in defendants' Lead
Trader Membership Plan. He presented evidence of eighty such
subscriptions, resulting in a total of $121, 400 paid to
defendants. The Commissioner eventually limited his
restitution request to $80, 000, reflecting $1000 for each of
the Lead Trader Membership Plan subscribers. The Commissioner
derived $1000 per subscriber from section 11-51-604(2.5),
C.R.S. 2016, which provides in pertinent part:
An investment adviser or investment adviser representative
who violates section 11-51-401 is liable to each person to
whom investment advisory services are provided in violation
of such section in an amount equal to the greater of one
thousand dollars or the value of all the benefits derived
directly or indirectly from the relationship or dealings with
such person prior to such time as the violation may be
48 Defendants contend that the trial court erred by imposing
restitution under section 11-51-604(2.5) because the
Commissioner cannot rely on that provision in an enforcement
action. We affirm the restitution order, albeit on somewhat
different grounds from those employed by the trial court.
See People v. Chase, 2013 COA 27, ¶ 17
("[W]e may affirm a trial court's ruling on grounds
different from those employed by that court, as long as they
are supported by the record.").
Standard of Review
49 We review de novo whether the trial court applied the
correct legal standard when determining an equitable remedy.
Zeke Coffee, Inc. v. Pappas-Alstad P'ship, 2015
COA 104, ¶ 11. The trial court has discretion, however,
to decide the components of such a remedy, and we review such
decisions for an abuse of discretion. Id. A court
abuses its discretion if it bases its ruling on an erroneous
view of the law or if its ruling is manifestly, arbitrary,
unreasonable, or unfair. See Genova v. Longs Peak
Emergency Physicians, P.C., 72 P.3d 454, 458-59
50 The Commissioner may seek to impose monetary liability on
an unlicensed investment adviser in addition to seeking
injunctive relief. § 11-51-602(1)-(2). The Commissioner
may include "a claim for damages under
section 11-51-604 or restitution, disgorgement, or other
equitable relief on behalf of some or all of the persons
injured by the act or practice constituting the subject
matter of the action[.]" § 11-51-602(2) (emphasis
51 Although the trial court imposed restitution against
defendants under section 11-51-604(2.5), defendants contend
that the court erred nonetheless. They argue that section
11-51-602(2)'s reference to section 11-51-604 permits
only an award of "damages" under the latter
statute. Defendants observe that subsection (2.5) of section
11-51-604 differs from other subsections because it does not
refer to the relief afforded therein as "damages."
Cf. § 11-51-604(1).
52 Until at least 1998, section 11-51-602(2)'s reference
to "damages under section 11-51-604" encompassed
all the monetary relief mentioned in section 11-51-604. Each
subsection of section 11-51-604 that discussed a type of
monetary relief labeled the relief "damages."
See § 11-51-604, C.R.S. 1997. In 1998, however,
the General Assembly added subsection (2.5), which (as noted)
does not refer to the relief it affords as
"damages." See Ch. 177, sec. 18, §
11-51-604(2.5), 1998 Colo. Sess. Laws 564. But did the
General Assembly thereby intend to prevent the Commissioner
from employing section 11-51-604(2.5)?
53 This question is best saved for a case in which the answer
affects the outcome. The answer does not alter the result
here because section 11-51-602(2) and the trial court's
findings support the $80, 000 award under a common law
restitution theory. Section 11-51-602(2) expressly authorizes
the Commissioner to seek such relief. Restitution is an
equitable remedy that "restores a party to his/her prior
status" and may be used "to deprive the defendant
of benefits that in equity and good conscience he ought not
to keep." Zeke Coffee, ¶ 13 (citations
54 As discussed, the trial court found, and the record shows,
that eighty subscribers enrolled in defendants' Lead
Trader Membership Plan. Each subscription cost a minimum of
$1000. Thus, defendants received a minimum of $80, 000 by
unlawfully providing investment advice without a license.
Although defendants point out that the trial court did not
find that they made false claims or that any subscriber
suffered losses (or did not receive the services advertised),
restitution is available "even though [defendant] may
have received those benefits honestly in the first instance,
and even though the plaintiff may have suffered no
demonstrable losses." Id. (citation
55 Accordingly, the record and the law support the
56 The trial court granted a permanent injunction against
defendants. The injunction contains two operative parts.
Defendants challenge both parts.
57 Part I(A) precludes defendants from "[a]ssociating in
any capacity with any broker-dealer, sales representative,
promoter, issuer, financial planner, investment adviser, or
investment adviser representative engaged in business in
Colorado, or any individual or entity engaged in the offer,
purchase, or sale of securities in or from Colorado."
The injunction defines the phrase "associating in any
[A]cting as a broker-dealer, sales representative, promoter
issuer, financial planner, investment adviser, investment
adviser representative (or occupying a similar status or
performing similar functions), or directly or indirectly
controlling, acting as agent for, or exercising common
control of a broker dealer; sales representative, promoter,
financial planner, or investment adviser, or any employee of
a broker-dealer, sales representative, promoter, issuer,
financial planner, or investment adviser.
58 Part I(B) essentially prohibits defendants from violating
parts 3, 4, and 5 of the CSA. This part of the injunction
closely tracks the language of section 11-51-301, C.R.S. 2016
(forbidding the sale of unregistered securities): sections
11-51-401 to -402 (barring doing business as broker-dealer,
sales representative, investment adviser unless licensed or
exempted); and section 11-51-501, C.R.S. 2016 (making it
unlawful to commit fraud in connection with the offer, sale,
or purchase of a security).
59 Defendants argue that Part I(A) improperly enjoins them
from engaging in lawful activity, while Part I(B) is
overbroad and vague. They further argue that the injunction
impermissibly chills their First Amendment rights.
Standard of Review
60 We review the trial court's order entering a permanent
injunction for an abuse of discretion. Stulp v.
Schuman, 2012 COA 144, ¶ 9. We defer to the trial
court's underlying factual findings if the record
supports them. Id. We review de novo whether an
injunction violates a constitutional right. Evans v.
Romer, 854 P.2d 1270, 1275 (Colo. 1993). We also
interpret statutory provisions de novo. Shelby Res., LLC
v. Wells Fargo Bank, 160 P.3d 387, 389 (Colo.App. 2007).
I(A): "Associating In Any Capacity"
61 Defendants contend that the trial court exceeded its
statutory authority and otherwise abused its discretion by
enjoining them from "associating in any capacity"
with securities professionals engaged in business in
62 According to defendants, the trial court could enjoin only
the particular act or practice that violated the CSA.
Defendants are mistaken.
63 The General Assembly enacted the CSA to "protect
investors and maintain public confidence in securities
markets while avoiding unreasonable burdens on participants
in capital markets." § 11-51-101(2). Because the
CSA is remedial in nature, we must construe its provisions
broadly to effectuate its remedial purpose. Id.
Section 11-51-602(1) authorizes the trial court to enjoin
violations of the CSA and to enforce compliance with it:
Whenever it appears to the [Commissioner] upon sufficient
evidence satisfactory to the [Commissioner] that any person
has engaged in or is about to engage in any act or practice
constituting a violation of any provision of this article or
of any rule or order under this article, the [Commissioner]
may apply to the district court of the city and county of
Denver to temporarily restrain or preliminarily or
permanently enjoin the act or practice in question and to
enforce compliance with this article or any rule or order
under this article.
64 Especially where the trial court finds that a defendant is
likely to violate the CSA again, the court's broad
authority under section 11-51-602(1) includes the power to
enjoin the defendant from associating with securities
professionals in order to enforce the defendant's future
compliance with the law (e.g., to protect against the
defendant's continued offering of unlicensed investment
advice). See Stulp, ¶¶ 25-26 (construing a
similarly worded provision in the Animal Control Act to
authorize the trial court to permanently enjoin an unfit
owner's ownership of livestock to ensure against future
mistreatment). To conclude otherwise would unnecessarily
hamstring a court's remedial power to prevent a person
unqualified to present investment advice and who has violated
section 11-51-401(1.5) from again skirting the CSA's
provisions by operating in the shadow of another. We may not
interpret the CSA in a manner that contradicts the
legislature's intent to protect investors and maintain
public confidence in securities markets. See §
65 Defendants point out that section 11-51-602(1) provides
additional remedies when a person has committed fraud as
described in section 11-51-501: "the court may enter an
order imposing such conditions on such person as the court
deems appropriate." Contrary to defendants' view,
however, this provision does not limit the trial court's
injunctive authority in cases not involving fraud. Instead,
the provision empowers a court to impose additional
conditions on, for instance, a licensed investment adviser
who has committed fraud (perhaps requiring the adviser to
give up a power of attorney or otherwise restricting the
adviser's ability to continue practicing).
66 Defendants also contend that the injunction violates
section 11-51-410(1)(b), C.R.S. 2016. That statute authorizes
the Commissioner to bar association with broker-dealers and
investment advisers only upon finding a willful violation of
the CSA. But that statute does not limit a trial
court's authority to impose an injunction enforcing
compliance with the CSA.
67 Consequently, the trial court possessed statutory
authority to enjoin defendants from associating with
securities professionals in order to ensure compliance with
the CSA. We now turn to whether the court abused its
discretion in exercising that authority.
Trial Court's Discretion
68 "An injunction is an extraordinary and discretionary
equitable remedy" that is "intended to prevent
future harm." Bd. of Cty. Comm'rs v.
Vendemoer, 205 P.3d 423, 430 (Colo.App. 2008). Trial
courts are vested with broad discretion to formulate the
terms of injunctive relief. Colo. Springs Bd. of
Realtors, Inc. v. State, 780 P.2d 494, 498 (Colo. 1989);
see also United States v. E.I. du Pont de
Nemours & Co., 366 U.S. 316, 323 (1961)
("[T]he suit has been a futile exercise if the
Government proves a violation but fails to secure a remedy
adequate to redress it.").
69 The trial court found the following. Neither defendant was
licensed as an investment adviser or investment adviser
representative. In fact, when Mandel previously applied for a
license, the Commissioner brought an enforcement action
against him for failure to disclose material facts in his
application. The enforcement action resulted in a stipulated
consent order barring Mandel from acting as or associating
with any Colorado licensed or "federal covered"
investment adviser. Yet, Mandel created an online membership
plan that included two separate vehicles offering
personalized investment advice, contrary to the CSA.
70 Together, Mandel's prior and recent misconduct
justified the trial court's concern that he, along with
WSR, will attempt once again to offer personalized investment
advice without a license or applicable exemption. And the
court could reasonably foresee that such attempts may involve
association with securities professionals. The injunction
sensibly seeks to ensure defendants' compliance with the
CSA by denying them a route to continue disseminating
personalized investment advice without a license. Hence, the
court's decision to enjoin defendants from
"associating in any capacity" with securities
professionals was not manifestly arbitrary, unreasonable, or
unfair. See Stulp, ¶ 26.
71 As written, however, the injunction does not comply with
C.R.C.P. 65(d). Under that rule, every injunction "shall
be specific in terms; [and] shall describe in reasonable
detail, and not by reference to the complaint or other
document, the act or acts sought to be restrained."
See also Colo. Springs Bd. of Realtors, 780 P.2d at
499 ("[A]n injunction prohibiting conduct must be
sufficiently precise to enable the party subject to the
equitable decree to conform its conduct to the requirements
thereof."). But the injunction here does not define the
terms "broker-dealer, sales representative, promoter,
issuer, financial planner, investment adviser, or investment
adviser representative." Presumably, the trial court
intended to refer to definitions contained in the CSA;
however, requiring defendants to refer to materials outside
the injunction's four corners is improper. See
C.R.C.P. 65(d). And the CSA does not appear to define
"promoter." The injunction must define such
important terms or omit them. See Wunder, ¶ 23
(finding an injunction impermissibly vague where it failed to
define "vacation or travel related services or
72 Furthermore, some of the terms lend themselves to very
broad application. For example, the trial court's
reasoning does not support an injunction barring Mandel from
associating with or being employed by any issuer, which may
include any entity that issues securities (depending on the
definition of "issuer"). In addition, the
court's findings do not reflect concerns about
defendants' radio show or newsletter. Yet, depending on
what "promoter" means, the injunction may prohibit
Mandel from discussing securities on the radio or in the
newsletter. The record does not show that the trial court
intended such a sweeping ban. In fact, such a far-reaching
injunction would raise constitutional concerns implicating
defendants' First Amendment rights.
73 Therefore, we vacate the injunction as to Part I(A). On
remand, the trial court, if it decides to enter a new
injunction, shall define all operative terms in the
injunction and shall narrow or eliminate any prohibitions
related to "issuer" and "promoter."
Additionally, the court shall clarify that the injunction
does not prohibit defendants from participating in a radio
show, publishing a newsletter with nonpersonalized investment
advice, or using similar mediums of the press that do not
disseminate personalized investment advice. See Osborn
& Caywood Ditch Co. v. Green, 673 P.2d 380, 383
(Colo.App. 1983) (vacating an injunction as too broad and
I(B): Obey-the-Law Provisions
74 Defendants contend that Part I(B) of the injunction is
nothing more than an edict to obey the law and, as a result,
it is overbroad and vague. Defendants are right.
75 The Commissioner does not deny that Part I(B) is an
"obey the law" injunction. And the Commissioner
rightly acknowledges that "[i]njunctions that do no more
than recite the law with which a party is to comply are
generally too vague." For instance, in Colorado
Springs Board of Realtors, our supreme court considered
a decree that "in effect simply prohibits the Board from
violating Colorado's antitrust laws." 780 P.2d at
499. The supreme court concluded that the "sweeping
language of the decree does not sufficiently inform the Board
of the steps it must take to avoid violations thereof."
Id. The supreme court remanded for revisions to the
decree to prohibit the specific violations the Board had
76 Other courts have agreed that an injunction essentially
requiring a party to obey the law raises several concerns.
See United States v. La.-Pac. Corp., 682 F.Supp.
1141, 1167 (D. Colo. 1988). The Commissioner draws our
attention to the Seventh Circuit's decision in Equal
Employment Opportunity Commission v. AutoZone, Inc., 707
F.3d 824, 842 (7th Cir. 2013), but that case cautioned that
"a request for an obey-the-law injunction must be
evaluated with great care." Such a request raises
vagueness concerns because, as discussed, an injunction must
be "specific in terms" and "describe in
reasonable detail . . . the act or acts sought to be
restrained." C.R.C.P. 65(d); see AutoZone, 707
F.3d at 841-42 (citing Fed.R.Civ.P. 65(d)). Additionally, an
obey-the-law injunction is enforceable by contempt motion,
which may bypass the normal administrative or adjudicative
processes required to establish that a defendant has violated
the law. AutoZone, 707 F.3d at 841; cf. Sec.
& Exch. Comm'n v. Smyth, 420 F.3d 1225, 1233
n.14 (11th Cir. 2005) ("This Circuit has held repeatedly
that 'obey the law' injunctions are
77 To mitigate these concerns, the Seventh Circuit held that
a court may impose an obey-the-law injunction only where
"the evidence suggests that the proven illegal conduct
may be resumed" and, even then, only with a temporal
limit. AutoZone, 707 F.3d at 842, 844.
78 To recap, our supreme court's decision in Colorado
Springs Board of Realtors casts doubt on a Colorado
court's authority to impose an obey-the-law injunction
under any circumstances. Even assuming that a court may enter
such an order in some cases, however, the obey-the-law
injunction must at least satisfy the Seventh Circuit's
conditions the Commissioner cites. The injunction here does
79 First, the obey-the-law injunction contains no temporal
limit. The injunction permits a contempt proceeding "no
matter how remote in time or different from the violation
proven in this case" and may "indefinitely deny
[defendants] the protections of the normal administrative and
adjudicative processes" attendant to proving a law
violation. AutoZone, 707 F.3d at 844.
80 Second, similar to the obey-the-law decree overturned in
Colorado Springs Board of Realtors, 780 P.2d at 499,
most of Part I(B) does not address the violations actually
proved in this case. Rather, Part I(B) requires compliance
with CSA provisions not at issue here.
81 Third, the only fragment of Part I(B) addressing the
unlawful conduct proved in this case - the portion of Part
I(B)(ii) forbidding defendants from acting as investment
advisers or investment advisor representatives in violation
of the CSA - does not clearly proscribe conduct not already
prohibited by Part I(A). We cannot uphold a presumptively
suspect obey-the-law injunction that appears to be of little
use or whose use is too nebulous to decipher. The fact that
this case involves a securities law violation does not give a
court unbridled authority to impose an obey-the-law
injunction. See Smyth, 420 F.3d at 1233 n.14;
Sec. & Exch. Comm'n v. Tourre, 4 F.Supp.3d
579, 598 (S.D.N.Y. 2014) ("[T]he Court is skeptical of
the utility of this kind of 'obey-the-law' injunction
- after all, everyone is required to obey the law, the law
comes with its own penalties, and merely reciting statutory
provisions gives an individual 'little guidance on how to
conform his conduct to the terms of the
injunction.'") (citation omitted). We therefore
reverse Part I(B) of the injunction.
Summary and Remand Directions
82 Part I(A) of the permanent injunction is vacated, and Part
I(B) is reversed. We remand for modification of Part I(A) at
the trial court's discretion. If the trial court elects
to impose a new injunction, it shall define all operative
terms and otherwise comply with the discussion herein. The
court need not take additional evidence.
83 The summary judgment and restitution order are affirmed.
The injunction is vacated in part and reversed in part, and
the case is remanded to the trial court for further
WEBB and JUDGE HAWTHORNE concur.
 The record also shows that Mandel
holds an interest in Ditto Trade separate from that of his
role as a lead trader: he entered into multiple joint
ventures and consulting agreements with Ditto Trade, and
pledged to raise substantial funds for the company. Mandel
sent e-mails and other communications to multiple clients
recommending their purchase of Ditto Trade stock, and he
hosted cocktail parties to promote the investment.
 The Commissioner offers the following
example: "[I]f Mandel made a trade of 100 shares of IBM
stock in his Lead Trader account, and he had five Followers
set to full throttle and the followers have the money
available to execute the trade, the Ditto Trade platform
would automatically buy an identical amount of shares of IBM
stock for the Followers and deposit them into the
Followers' brokerage accounts." Defendants do not
dispute the validity of this example.
 As explained in the consent order,
"association" meant "being a partner, officer,
director of an investment adviser, or person performing
similar functions, or an employee or agent of an investment
adviser, or any person directly or indirectly controlling, or
controlled by, an investment adviser."
Concurring in the result, Justice
White adopted a much narrower construction of the statutory
exclusion, found that the exclusion did not exempt the
petitioners from registration as investment advisers, and
concluded that this registration requirement violated the
First Amendment See Lowe v Sec & Exch
Comm'n, 472 U.S. 181, 211-36 (1985) (White, J,
concurring in the result).
 The controls offered by Ditto
Trade do not alter the fact that a lead trader effectively
has investment discretion over some or all of a
follower's investment account.
Defendants ground their First Amendment claim in Lowe, which
focused on the freedom of the press. Defendants rely on the
Court's opinion, Justice White's concurrence in the
result, and cases citing to his concurrence. Because
defendants limit their constitutional contention to Lowe and
its progeny, we limit our inquiry to the First Amendment
concerns discussed in Lowe. We express no opinion on the
First Amendment implications of a service like
defendants' crystal ball readings that is offered without
charge to questioners about whom the person answering the
question has no knowledge.
As mentioned, Justice White's opinion in Lowe discerned
constitutional problems with the federal act because he
adopted a different, narrower construction of the act. The
Court, however, rejected his statutory interpretation.
Because Colorado case law is on point, we need not look to
Van Zanen v. Qwest Wireless L.L.C., 522 F.3d 1127
(10th Cir. 2008), cited by defendants. In addition, that case
predates Zeke Coffee, Inc. v. Pappas-Alstad
Partnership, 2015 COA 104.
Although not a basis for our decision, we note that some of
defendants' subscribers did complain that their
auto-trading accounts suffered losses.
 True, the division in Black
Diamond Fund, LLLP v. Joseph, 211 P.3d 727, 738
(Colo.App. 2009), upheld the Commissioner's cease and
desist order requiring the respondents to comply with
Colorado law. The respondents, however, argued only that the
sanction was arbitrary and capricious because the
Commissioner had not identified whether the sanction served
the public interest. Id. The division rejected that
argument but did not address whether the order was too vague
or overbroad in duration.