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On April 30, 1998, Governor Romer signed into law House Bill 98-1244, a bill for the regulation of investment advisory activities. Under the law, the Colorado Securities Commissioner and Securities Division will license and regulate state-based investment advisers and investment adviser representatives who work in Colorado, effective January 1, 1999.
Simply stated, an "Investment Adviser" ("IA") is a person (think of it as a company) who, for a fee, provides advice to customers about investing in securities. An "Investment Adviser Representative" ("IAR") is an individual who works for an IA and provides investment advisory services to customers.
The Colorado IA law was enacted in the context of the federal National Securities Markets Improvement Act of 1996 ("NSMIA"), under which Congress split regulatory responsibility for investment advisers between the Securities and Exchange Commission and state securities regulators. IA firms with more than $100 million in assets under management ("Federal Covered Advisers" or "FCAs") are regulated exclusively by the SEC. Colorado regulates IA firms ("state IAs") located in Colorado with assets under that threshold. Investment adviser representatives ("IARs"), individuals with a place of business in Colorado who work for FCAs or state IAs in providing investment advice to customers, need a Colorado IAR license.
To be licensed in Colorado, the filing of IA and IAR license applications and fees is required. IAR license applicants are required to take and pass a minimum competency examination or provide proof of alternate qualifications. Annual fees will be required each year. Licensees are subject to inspection, dishonest and unethical business practice rules, customer disclosure requirements and anti-fraud provisions.
A FCA 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, is required to make a notice filing.