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Concerning Regulations under the Colorado Securities Act of persons offering Investment Advisory services.
The following is a list of frequently asked questions and their answers regarding the Colorado regulations of investment advisers and investment adviser representatives.
1. Q: I am a sole proprietor. Do I need to submit two (2) "IARD Account Administrator Entitlement" Forms?
A: No. The instructions ask for 2 forms to provide for a back-up administrator. Your back-up person need not be licensed (Ex: admin assistant).
2. Q: I am only licensed in Colorado and not with the SEC. Do I need to file through the IARD?
A:Yes. Use of the IARD by Colorado licensed advisers was made mandatory beginning on July 31, 2001 and July 1, 2002 for IARs. For IARD information CLICK HERE.
3. Q: Who is affected by the Colorado law? A: Persons (meaning entities and/or individuals) offering investment advisory services are affected by the Colorado law. This includes three categories: Federal Covered Advisers ("FCAs"), other Investment Adviser entities ("IAs") and Investment Adviser Representatives ("IARs").
4. Q: When did the Colorado Investment Adviser law go into effect?
A: As of January 1, 1999, there has been a licensing (or notice filing) requirement for FCAs, IAs and IARs.
5. Q: What is a Federal Covered Adviser or "FCA"?
A: FCA is a term used nationally. You should already know if you are one. If you don't know, contact the Securities and Exchange Commission ("SEC") in Washington, D.C. They are the experts.
6. Q: What do I file if I am a FCA?
A: A FCA, either with a place of business in this state or who employs or otherwise engages an individual with a place of business in this state to act as an IAR, shall file a current Form ADV and pay the appropriate fee. For each IAR with a place of business in Colorado the FCA shall file a Form U-4 and pay the IAR fee. (refer to the FEE Schedule) Filings are submitted using the IARD.
7. Q: What do I file if I am a FCA with no place of business in Colorado and I do not employ or otherwise engage an individual with a place of business in Colorado to act as an IAR?
A: Your FCA files nothing in Colorado.
8. Q: Are there any exemptions from licensing for an IA located in another state, that are not FCAs?
A: The law contains a diminimus exemption from licensing for an IA that has no place of business in Colorado and has five or less clients in Colorado.
9. Q: What is required of an IA located in another state that is not a FCA, has five or less clients in Colorado and employs one or more IARs with a place of business in Colorado?
A: The difference between this question and the one immediately above is the IA employs IARs with a place of business in Colorado. It does not matter how many clients are located in Colorado. An IA should file a current Form ADV and pay the appropriate fee. For each IAR with a place of business in Colorado the IA shall file a Form U-4 for each individual and pay the IAR fee.
10. Q: I am a financial planner. Do the Colorado laws and regulations apply to me?
A: Maybe. Part of the definition of an investment adviser includes financial planners or others who, as a component of other financially related services, provide investment advisory service to others for compensation. Advice about securities and compensation for that advice is the key issue. Another part of the definition states that you are an investment adviser if you hold yourself out as providing investment advisory services to others for compensation.
11. Q: Which individuals working for my investment advisory company need to be licensed?
A: Investment adviser representatives (IARs) with a place of business in Colorado must be licensed whether employed by a FCA or an IA.
12. Q: May I be dually licensed as an investment adviser representative?
A: Yes. You may be dually licensed for more than one FCA, for more than one IA, for both a FCA and an IA and as an IAR at the same time as you are a sales representative (broker). You must however, file separate license applications for each and pay separate fees.
13. Q: What forms will I have to file with the division? How many copies? Do you require original signatures?
A: Currently, the Form ADV Part II and a copy of your client agreement are the only paper documents you must file with the Division. Filing one copy of each is sufficient.
14. Q: I understand I should file a Consent to Service of Process also. Where do I get that form?
A: The "consent" is built into Forms ADV and U-4. When you electronically sign and submit the forms, you have satisfied the "consent" requirement.
15. Q: I don't have a Form ADV or a Form U-4, how can I obtain them?
A: Print them from the SEC (Form ADV) or NASD (Form U-4) web sites. (SeeLicensing Information for web addresses)
16. Q. Do I have to submit a fingerprint card with my U-4?
17. Q: What examinations must IARs take in order to qualify for a license in Colorado?
A: IARs seeking to license must pass the Series 65 examination. There are alternate qualifications acceptable in lieu of Series 65.
18. Q: Will FCAs, IAs or IARs receive some kind of evidence of their license?
A: No, the Division is no longer sending out confirmation letters. To verify your license status contact the CRD/IARD.
19. Q: When should I amend Forms ADV or U-4 to reflect a material change?
A: Forms ADV-I and U-4 are amended electronically to reflect material changes in a timely manner. Please note on the applicable form that you are filing an amendment to a previous filing.
20. Q: How do FCAs, IA or IARs terminate with the Colorado Division of Securities?
A: A FCA or IA needs to file the Form ADV-W with the IARD. An IAR needs to file a Form U-5 with CRD. There is no fee for filing these forms.
21. Q: Does Colorado have a surety bond requirement for IAs?
A: No, not at this time.
22. Not used at this time
23. Q: In the past, we were required to file ADV updates with the SEC within 90 days of the end of our fiscal year (typically that meant by March 31). Does Colorado require the same kind of annual filing?
A: Yes, commencing in calendar year 2003.
24. Q: Does the Division require the filing of annual audits or financial statements?
A: The only investment advisory firms required to file financial statements are those that have custody of client funds and/or securities, or those that have been specifically requested to submit financial statements. Colorado's Books and Records Rules require each advisor to maintain accurate financial statements and records.