Telephonic Procedural Conference - S-21262A-23-0224 - Sterling Investments Advisor LLC d/b/a Sterling Advisor Group et. al S-21262A-25-0037 - Sterling Investments Advisor LLC d/b/a Sterling Advisor Group, et. al et al. - Jun 26, 2026

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Arizona Corporation Commission 1h 7m 8 agenda items transcribed 3 days ago official recording ↗

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What is the purpose of this procedural conference and who are the parties involved?

Mark Frenney 0:00

Okay, let's go on the record. This is the time scheduled for a procedural conference. In the consolidated matters of Sterling Investment Advisor LLC et al., the docket numbers are S-21262A-23-0224 and S-21262A-23-0224. That's 21262A-25-0037. I'm Administrative Law Judge Mark Frenney. I will be presiding over the matter today. I will begin by taking appearances for the record, starting first with counsel for the Securities Division.

Elizabeth Schmidt 0:53

Good morning. This is Elizabeth Schmidt, counsel with the division.

Mark Frenney 0:57

Morning, Ms. Schmidt. and appearing for the respondents.

Tim Szabo 1:02

Yes, good morning, Your Honor. This is Tim Szabo and Rachel Romanuk, and we're with the law firm of Osborne Maladon, appearing on behalf of all of the respondents.

Mark Frenney 1:14

Good morning, Mr. Szabo and Ms. Romanuk. We quick-set this procedural conference following the respondents' filing of a Motion to continue. Mr. Savo, it's your motion. I'll turn to

Tim Szabo 1:36

you. Thank you, Your Honor. Good morning, everyone. There's been a fair amount of briefing, so I'm not going to belabor all of the points. But there's a few things I wanted to bring to your attention, Your Honor, this morning. The first ground that we have for a continuance is that delay or continuance is appropriate at this time due to the defense's reasonable reliance on the settlement discussions with the Securities Division. We've got all the timing and back and forth in our motion, but the Bottom line is that the defense reasonably relied on assurances from the division that the settlement was under review and that includes the division's November 7 email that the attorney had sent non-substantive edits for clarity to our proposed order up to the management of the division.

Tim Szabo 2:52

The implication of that is that that was what the recommendation for the least consideration of that settlement. And really throughout this time, we've had, Your Honor, discussions going on all throughout 2025 and then into 2026 with follow-ups from the respondents to the division on January 6, February 3, March 23, April 27. And to the extent that there were responses, the responses were along the lines of, yes, this is under consideration, we're looking at it, et cetera, et cetera. Then we did have a in-person settlement conference on May 19, where the division formally rejected the offer, but they invited ongoing discussions. And so it appeared that settlement talks were still being productive.

Tim Szabo 3:58

And in fact, we presented a alternative approach that the division said they would consider. So it looks still like this thing was going to settle even in May. And then even into June, we had a video call with a council who's on the line as well as the director of enforcement that was on June 3rd. Again, there was a discussion of various proposals for rule 408 purposes. I won't get into what the proposals were, but they were actively discussed. Then the division did ask for additional information, which we said we would provide to them. Then we received additional subpoenas on the 4th, which is consistent with them wanting the information. And subsequently, we received a draft motion to continue from the division on also on June 4th.

Tim Szabo 5:03

So as late as June 4th, it looked like this thing is going to settle, there's going to be a continuance and we'll work a settlement out. And then where it seemed to go off track was on June 5th, where the division withdrew their draft motion to continue. And so At that point we got started we prepared our motion to continue on June 11th and then there's been various filings that that day. But the The high level summary here is, you know, until really June 5th, it looked like this was going to settle. Both sides were participating in settlement discussions. The defense received multiple indications that the settlement talks were, you know, it really looked like this was going to settle. So when we have a situation where trial preparation is going to cost hundreds of thousands of dollars,

Tim Szabo 6:05

Like you're reluctant to pull the trigger on that if it really looks like it's going to settle. And so that's how we got here.