Audit finds Securities deficiencies

The Utah Division of Securities was rife with personnel conflicts, had unclear roles in handling duties and managed cases inconsistently and sometimes inappropriately, according to a legislative audit report released Friday.

The leader of the Department of Commerce, which includes the division, says steps to correct most of the deficiencies cited in the audit have been implemented, except for one that will require legislative action.

The audit report said concerns raised by people investigated by the division involved "procedural errors, an alleged overzealous pursuit of securities violations, and the perception that those investigated do not receive fair treatment" — all of which were "heightened" by personnel conflicts within the division.

"These concerns appear to be a result of the division not following established policies and procedures," the audit report states. "Case management is inconsistent and, at times, appears inappropriate. ... The division has significant authority, but its credibility depends on using that authority judiciously."

A pair of legislators requested the audit, in part because of controversy over the division's handling of a securities-fraud investigation. The auditors looked at more than 20 cases the division handled in recent years.

The recommendations call for clarifying or establishing policies that better define the roles of the division director and the presiding officer of division cases, outline interaction with the attorney general's office, and guide case management. Others seek a change to the division's advisory board to make it a commission providing division oversight.

In a letter included in the audit report, Francine Giani, executive director of the Commerce Department, listed ways that the audit recommendations already have been implemented.

"We have made the changes that have been requested, except for one which requires a legislative change, and we have a sponsor for a bill to change the way the board is structured, and we will do that next session," she told the Deseret News.

Complaints about the division included that it "used intimidation to coerce cooperation and violated settlement agreements" forged with people it investigated, according to the audit report.

Rep. Jim Bird, R-West Jordan, who requested the audit, told the Deseret News that most of the report's findings were expected.

"The audit, I think, has come back and said, 'You know, there's a huge problem in the Division of Securities, and it's going to take some huge problem-solving people to fix them.' And it also indicates it's going to take some legislation to fix the advisory council," Bird said.