Bountiful, UT asked in Securities Law for Utah

Q: May a section 501(c)3 foundation file a lien on the real property of a person who allegedly defrauded foundation

A Registered Investment Advisor under the SEC is alledged to have defrauded our 501(c)3 foundation of $250k. We want to file a lien on this person's residential real property in Utah. Our foundation is located in California.

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1 Lawyer Answer
Zaven Andranik Sargsian
Zaven Andranik Sargsian
  • Securities Law Lawyer
  • Salt Lake City, UT
  • Licensed in Utah

A: Firstly, there is palpable complexity to the question you are asking. It involves securities laws, a 501(c)(3) non-profit, Utah property law, liens, and jurisdictional issues. I would strongly encourage you to contact a Utah attorney to assist you with this matter.

To begin with, there appears to be no issue with a 501(c)(3) filing a lien. The important question, however, is whether the lien on this investment advisor's "residential real property in Utah" would be justified.

Title 38 of Utah's code includes the various liens available to individuals. There doesn't appear to be any "securities fraud" lien in title 38. There is a judgment lien, for example. But it doesn't sound like you have a judgment against this investment advisor. (A lawsuit is probably something that you should consider initiating). Another option is what are called equitable liens. Again, you would want a Utah attorney to research this question.

The reason additional research is important is because, as you might notice, Title 38 of Utah's law, has a wrongful lien provision (in chapter 9). In other words, there can be serious consequences if a person or entity (including your foundation) files a wrongful lien. That is why ensuring your lien is appropriately filed is of primary importance.

One last thing, besides Utah law, note that the Securities and Exchange Commission has ways of helping investors that have been defrauded. This includes asking the court to create a receivership, or setting up fair funds and disgorgement funds, which might distribute any money it recovers (cross your fingers) to defrauded investors. You should get in touch with the SEC and see what their attorneys might suggest.

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