§ 23-39-514 - Disciplinary authority.
23-39-514. Disciplinary authority.
(a) The Securities Commissioner by order may deny, suspend, revoke, or refuse to issue or renew a license of a licensee or applicant under this subchapter or may restrict or limit the activities relating to mortgage loans of any licensee or any person who owns an interest in or participates in the business of a licensee if the commissioner finds that:
(1) The order is in the public interest; and
(2) Any of the following circumstances apply to the applicant, licensee, or any partner, member, manager, officer, director, loan officer, managing principal, or any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the applicant or licensee. The person:
(A) Has filed an application for a license that as of its effective date or as of any date after filing contained any omission or statement that in light of the circumstances under which it was made is false or misleading with respect to any material fact;
(B) Has violated or failed to comply with any provision of this subchapter, any rule adopted by the commissioner, or any order of the commissioner issued under this subchapter or under Acts 1977, No. 806;
(C) Has pleaded guilty or nolo contendere to or has been found guilty in a domestic, foreign, or military court of:
(i) A felony;
(ii) An offense involving breach of trust, moral turpitude, money laundering, or fraudulent or dishonest dealing within the past ten (10) years; or
(iii) An offense involving mortgage lending, any aspect of the mortgage industry, or any aspect of the securities industry, the insurance industry, or any other activity pertaining to financial services;
(D) Is permanently or temporarily enjoined by any court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of the mortgage industry, the securities business, the insurance business, or any other activity pertaining to financial services;
(E) Is the subject of an order of the commissioner:
(i) Denying, suspending, or revoking that person's license as a mortgage broker, mortgage banker, mortgage servicer, loan officer, securities broker-dealer, securities agent, investment adviser, or investment adviser representative; or
(ii) Directing that person to cease and desist from any activity regulated by the commissioner, including any order entered pursuant to Acts 1977, No. 806;
(F) Is the subject of an order, including any denial, suspension, or revocation of authority to engage in a regulated activity by any other state or federal authority to which the person is, has been, or has sought to be subject, entered within the past five (5) years, including, but not limited to, the mortgage industry;
(G) Has been found by a court of competent jurisdiction to have charged or collected any fee or rate of interest or made or brokered any mortgage loan with terms or conditions or in a manner contrary to Arkansas Constitution, Amendment 60;
(H) Does not meet the qualifications or the financial responsibility, character, or general fitness requirements under 23-39-505 or any bond or net worth requirements under this subchapter;
(I) Has been the executive officer or controlling shareholder or owned a controlling interest in any mortgage broker, mortgage banker, or mortgage servicer who has been subject to an order or injunction described in subdivisions (a)(2)(D)-(G) of this section; or
(J) (i) Has failed to pay the proper filing fee, renewal fee, or any late fees under this subchapter.
(ii) The commissioner may enter a denial order against a person under this subsection when the person has failed to pay the proper filing fee, renewal fee, or any late fees under this subchapter, but the commissioner shall vacate the order when all fees have been paid.
(b) (1) The commissioner by order may impose a civil penalty upon a licensee or any partner, officer, director, member, manager, or other person occupying a similar status or performing a similar function on behalf of a licensee for any violation of this subchapter, a rule under this subchapter, or an order of the commissioner.
(2) The civil penalty shall not exceed ten thousand dollars ($10,000) for each violation under subdivision (b)(1) of this section by a mortgage broker, mortgage banker, mortgage servicer, or loan officer.
(c) (1) The commissioner by order may summarily postpone or suspend the license of a licensee pending final determination of any proceeding under this section.
(2) Upon entering the order, the commissioner shall promptly notify the applicant or licensee that the order has been entered and the reasons for issuing the order.
(3) The applicant or licensee may contest the order by delivering a written request for a hearing to the commissioner within thirty (30) days from the date on which notice of the order is sent by the commissioner to the address of the licensee on file with the commissioner by first class mail, postage prepaid.
(4) The commissioner shall schedule a hearing to be held within thirty (30) days after the commissioner receives a timely written request for a hearing, unless the hearing is postponed for a reasonable amount of time at the request of the licensee.
(5) If a licensee does not request a hearing and the commissioner does not order a hearing, the order will remain in effect until it is modified or vacated by the commissioner.
(6) If a hearing is requested or ordered by the commissioner, after notice of and opportunity for hearing, the commissioner may modify or vacate the order or extend it until final determination.
(d) (1) In addition to other powers under this subchapter, upon finding that any action of a person is in violation of this subchapter, the commissioner may summarily order the person to cease and desist from the prohibited action.
(2) (A) Upon entering the order under subdivision (d)(1) of this section, the commissioner shall promptly notify the person that the order has been entered and state the reasons for the order.
(B) The person may contest the cease and desist order by delivering a written request for a hearing to the commissioner within thirty (30) days from the date on which notice of the order is sent by the commissioner to the last known address of the person by first class mail, postage prepaid.
(C) The commissioner shall schedule a hearing to be held within a reasonable amount of time after the commissioner receives a timely written request for a hearing.
(D) If the person does not request a hearing and the commissioner does not order a hearing, the order will remain in effect until it is modified or vacated by the commissioner.
(E) If a hearing is requested or ordered, after notice of and opportunity for hearing, the commissioner may modify or vacate the order or make it permanent.
(3) (A) A person shall be subject to a civil penalty of up to twenty-five thousand dollars ($25,000) for each violation of the commissioner's cease and desist order committed after entry of the order if:
(i) The person subject to the cease and desist order fails to appeal the order in accordance with 23-39-515 or if the person appeals and the appeal is denied or dismissed; and
(ii) The person continues to engage in the prohibited action in violation of the commissioner's order.
(B) The commissioner may file an action requesting the civil penalty under subdivision (d)(3)(A) of this section with the Pulaski County Circuit Court or any other court of competent jurisdiction.
(C) The penalties of this section apply in addition to, but not in lieu of, any other provision of law applicable to a person for the person's failure to comply with an order of the commissioner.
(e) Unless otherwise provided, any action, hearing, or other proceeding under this subchapter shall be governed by the Arkansas Administrative Procedure Act, 25-15-201 et seq.
(f) If the commissioner has grounds to believe that any person has violated the provisions of this subchapter or that facts exist that would be the basis for an order against a licensee or other person, the commissioner or the commissioner's designee, at any time, may investigate or examine the loans and business of the licensee and examine the books, accounts, records, and files of any licensee or other person relating to the complaint or matter under investigation.
(g) (1) The commissioner or the commissioner's designee may:
(A) Administer oaths and affirmations;
(B) Issue subpoenas to require the attendance of and to examine under oath all persons whose testimony the commissioner deems relevant to the person's business; and
(C) Issue subpoenas to require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records that the commissioner considers relevant or material to the inquiry.
(2) (A) In case of contumacy by or refusal to obey a subpoena issued to any person, the Pulaski County Circuit Court, upon application by the commissioner, may issue an order requiring the person to appear before the commissioner or the officer designated by the commissioner, to produce documentary evidence if so ordered, or to give evidence touching the matter under investigation or in question.
(B) Failure to obey the order of the court may be punished by the court as a contempt of court.
(3) (A) The assertion that the testimony or evidence before the commissioner may tend to incriminate or subject a person to a penalty or forfeiture shall not excuse the person from:
(i) Attending and testifying;
(ii) Producing any document or record; or
(iii) Obeying the subpoena of the commissioner or any officer designated by the commissioner.
(B) However, no person may be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which the person is compelled, after claiming a privilege against self-incrimination, to testify or produce evidence, except that the person testifying is not exempt from prosecution and punishment for perjury or contempt committed while testifying.
(h) (1) From time to time and with or without cause, the commissioner may conduct examinations of the books and records of any applicant or licensee in order to determine the compliance with this subchapter and any rules adopted under this subchapter.
(2) The applicant or licensee shall pay a fee for each examination under subdivision (h)(1) of this section, not to exceed one hundred fifty dollars ($150) per examiner for each day or part of a day during which any examiners are absent from the office of the commissioner for the purpose of conducting the examination.
(3) In addition, the applicant or licensee shall pay the actual hotel and traveling expenses of the examiner traveling to and from the office of the commissioner while the examiner is conducting an examination under subdivision (h)(1) of this section.
(i) If the commissioner finds that the managing principal, branch manager, or loan officer of a licensee had knowledge of, or reasonably should have had knowledge of, or participated in any activity that results in the entry of an order under this section suspending or withdrawing the license of a licensee, the commissioner may prohibit the managing principal, branch manager, or loan officer from serving as a managing principal, branch manager, or loan officer for any period of time the commissioner deems appropriate.
(j) All orders shall contain written findings of fact and conclusions of law. Except for orders entered under subdivisions (c)(1) and (d)(1) of this section, before entering an order under this section, the commissioner shall provide:
(1) Prior notice to the licensee or person who is the subject of the order; and
(2) An opportunity for hearing.
(k) This section does not prohibit or restrict the informal disposition of a proceeding or allegations that might give rise to a proceeding by stipulation, settlement, consent, or default in lieu of a formal or informal hearing on the allegations or in lieu of the sanctions authorized by this section.
(l) (1) If it appears upon sufficient grounds or evidence satisfactory to the commissioner that any person or licensee has engaged in or is about to engage in any act or practice that violates this subchapter or any rule or regulation adopted or order issued under this subchapter or that the assets or capital of any licensee are impaired or the licensee's affairs are in an unsafe condition, the commissioner may:
(A) Refer the evidence which is available concerning violations of this subchapter or any rule, regulation, or order issued under this subchapter to the appropriate prosecuting attorney or regulatory agency, that with or without the reference may institute the appropriate criminal or regulatory proceedings under this subchapter; and
(B) (i) Summarily order the licensee or person to cease and desist from the act or practice under subdivisions (c)(1) and (d)(1) of this section and apply to the Pulaski County Circuit Court to enjoin the act or practice and to enforce compliance with this subchapter or any rule, regulation, or order issued under this subchapter, or both.
(ii) However, without issuing a cease and desist order, the commissioner may apply directly to the Pulaski County Circuit Court for injunctive or other relief.
(2) Upon proper showing, the court shall grant a permanent or temporary injunction, restraining order, or writ of mandamus.
(3) The commissioner may also seek and upon proper showing the appropriate court shall grant any other ancillary relief that may be in the public interest, including:
(A) The appointment of a receiver, temporary receiver, or conservator;
(B) A declaratory judgment;
(C) An accounting;
(D) Disgorgement;
(E) Assessment of a fine in an amount of not more than ten thousand dollars ($10,000) for each violation; and
(F) Any other relief as may be appropriate in the public interest.
(4) The court may not require the commissioner to post a bond.