Investment Advisers and Investment Adviser Reps
General Licensure Information
In order to transact business as an investment adviser or investment adviser representative in the State of Colorado, a person must be licensed or exempt from licensing under Section 11-51-402, C.R.S.
Who needs to be licensed?
- Investment Advisers (IAs) – Firms that employ Investment Adviser Representatives.
- Investment Adviser Reps (IARs) – Individuals who offer investment advice including financial planning services.
With whom do investment advisers and investment adviser reps need to be licensed?
- Regulatory responsibility for IAs and IARs is split between the Securities and Exchange Commission (SEC) and state securities regulators.
- In general, IA firms with more than $100 million in assets under management (Federal Covered Advisers or FCAs) are regulated exclusively by the SEC. However, an 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 with the Colorado Division of Securities.
- IA firms located in Colorado with assets under the $100 million threshold are regulated by the Colorado Division of Securities. Additionally, IA firms not located in Colorado with assets under $100 million who have more than five clients in Colorado are required to have a Colorado license.
- IARs with a place of business in Colorado who work for either an FCA or an IA in providing investment advice to customers need to be licensed in Colorado. The SEC does not license IARs at the federal level.
Investment Advisor Registration Depository (IARD) Information
- IARD is the electronic filing system that provides regulatory oversight over investment advisers nationwide. It is operated by the Financial Industry Regulatory Authority (FINRA) and sponsored by the North American Securities Administrators Association (NASAA) and the SEC.
- IARD houses Forms ADV Part 1 and Part 2, corresponding amendments, and Form U-4, which are uniform forms used by investment advisers to register or license with the SEC and state securities authorities.
For additional information on IARD responsibilities, visit the IARD website.
IA and IAR Licensing Overview
- Both an application and a fee are required in order to obtain an IA or IAR license. Annual renewal fees are required thereafter to maintain licensure.
- IAR license applicants are required to take and pass a minimum competency examination or provide proof of alternate qualifications.
- Licensees are subject to inspection or examination to confirm the adequacy of business records, ensure fiduciary duty records compliance, and prevent violations of the anti-fraud provisions of the Colorado Securities Act.
Complete the following steps to apply for IA licensure:
- Step 1) Become entitled (if you are not already) to use the IARD system by submitting the IARD Entitlement Form to IARD through FINRA. The link can be found here.
- Step 2) Submit the required license fees for the firm and the firm's IARs seeking to be licensed and the IARD system fee through your IARD flex account.
- Step 3) File form ADV (Part 1A-1B, 2A, 2B, and Form(s) U4 [see below]) through the IARD. All parts are required.
- Step 4) Submit a sample of all client contracts or offering documents the adviser intends to use by regular email to John Harth at John.Harth@state.co.us
- Step 1) Every individual IAR licensure must meet one of the following minimum qualifications:
- At the time of submission of the Form U-4, the individual IAR applicant must possess either (1) an unexpired Series 65 examination or (2) an unexpired Securities Industry Essentials examination and an unexpired Series 66 examination, or (3) one of the following five professional designations in good standing: Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Certified Insurance Counselor (CIC), Chartered Financial Consultant (ChFC), or Personal Financial Specialist (PFS) at the time of application, or (4) under certain limited circumstances, current licensure in good standing as an IAR in another jurisdiction. You may also take the Series 65 or 66 without firm sponsorship. For more information on FINRA exams, click here.
- Note: If you are employed by or sponsored by an IA, you may request to take an exam by marking the appropriate sections on the Form U-4.
- Step 2) Submit the required license fee and any required examination fee.
- Step 3) File Form U-4. Instructions for completing and filing the form can be found on the "Forms" section of this site. Form U-4 must be submitted by or on behalf of every IAR seeking to be employed by the IA.
- Note: A sole proprietor is both an IA and an IAR so, therefore, must submit both an ADV and a Form U-4.
The following is a list of frequently asked questions regarding Colorado regulations of investment advisers and investment adviser representatives.
1. Q: I am a sole proprietor. Do I need to submit two "IARD Account Administrator Entitlement" Forms?
A: No. The instructions request two forms in order to provide for a back-up administrator, but this is not a requirement. Your back-up person need not be licensed (Example: administrative 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: Which people or entities that provide investment advisory services are subject to the Colorado Securities Act?
A: Both firms and individuals. This includes three categories: Federal Covered Advisers ("FCAs"), other Investment Adviser entities ("IAs") and Investment Adviser Representatives ("IARs").
4. Q: What is a Federal Covered Adviser or "FCA"?
A: An investment adviser who is required to be registered and file annually with the SEC based on meeting certain assets-under-management thresholds. Investment advisers required to be licensed in 15 or more states can opt to register with the SEC and would become an FCA. If you are not sure whether your firm is an FCA, please contact the SEC. If you are not an FCA, you are probably a state-licensed IA.
5. Q: What do I file if I am an FCA?
A: An 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 to notice-file 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.
6. Q: What do I file if I am an 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 is not required to obtain a state license or complete a notice filing in Colorado.
7. Q: Are there any exemptions from licensing for a state-licensed IA located in another state that has no place of business in Colorado?
A: The Colorado Securities Act provides a de minimis exemption from licensing for a state-licensed IA that has no place of business in Colorado and has five or fewer clients in Colorado. [see §11-51-402 (5)(a)(III), C.R.S.]
8. Q: What is required of a state-licensed IA located in another state, has five or fewer 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 if the IA employs one or more IARs with a place of business in Colorado. A Colorado license is required under these circumstances. 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 and pay the IAR fee.
9. Q: I am a financial planner. Do the Colorado laws and regulations apply to me?
A: Maybe. The Colorado Securities Act provides the following definitions of “investment adviser:” (1) any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of regular business, issues or promulgates analyses or reports concerning securities; or (2) financial planners or other persons who, as an integral component of other financially related services, provide investment advisory services to others for compensation and as a part of a business or who hold themselves out as providing investment advisory services to others for compensation. §11-51-201(9.5)(a)(I) and (II).
10. Q: Which individuals working for my investment advisory company need to be licensed?
A: All investment adviser representatives (IARs) with in Colorado must be licensed in Colorado, whether employed by an FCA or a state-licensed IA.
11. Q: May I be dually licensed as an investment adviser representative and a sales representative for a broker-dealer?
A: Yes. You may be dually licensed for more than one FCA, for more than one IA, for both an FCA and an IA and as an IAR at the same time as you are a sales representative (broker) licensed with a broker-dealer. You must, however, file separate license applications for each license at each firm and pay separate fees.
12. Q: What forms will I have to file with the Division? How many copies?
A: Currently, a copy of your client agreement(s) for advisory services is the only document you must file directly with the Division. Filing one copy of each contract is sufficient.
13. 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.
14. 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 FINRA (Form U-4) websites.
15. Q. Am I required to submit a fingerprint card with my U-4?
A: No. See Section 2, “Fingerprint Information”, of the Form U-4 and, when submitting a Colorado-only IAR licensing request, check the first two (2) boxes in the “Investment Adviser Representative Only Applicants” portion.
16. Q: What examinations must IARs take in order to qualify for a license in Colorado?
A: See the Investment Adviser Reps (Individuals) Application Process section above on this website.
17. Q: Will FCAs, IAs, or IARs receive some kind of evidence of their license?
A: The Division emails approval letters upon approving a state-licensed IA Firm. To verify your license status, contact the IARD state-licensed IA help desk at 240-386-4848.
18. Q: When should I amend Forms ADV or U-4 to reflect a material change?
A: Forms ADV and U-4 require amendment in a timely manner through the IARD system to reflect material changes. Please note on the appropriate form that you are filing an amendment to a previous filing.
19. Q: How do FCAs, IAs or IARs terminate with the Colorado Division of Securities?
A: An IAR must file a Form U-5 with CRD. An FCA or IA must file a Form ADV-W with the IARD. There is no fee for filing these forms.
20. Q: Does Colorado have a surety bond requirement for IAs?
A: IAs must always have a positive liquid net worth; IAs with discretionary authority must always have liquid net worth in excess of $10,000; IAs with custody must always have liquid net worth in excess of $35,000, and an IA with discretionary authority or custody who does not meet the applicable minimum liquid net worth requirement must also be bonded in the amount of the net worth deficiency rounded up to the nearest $5,000. An investment adviser that has its principal place of business in a state other than Colorado, is properly licensed in that state and satisfies the bonding requirement of that state, is exempt from the requirements above. [See Rule 51-4.13(IA).]
21. Q: In the past, we were required to file within 90 days of the end of our fiscal year (typically that meant by March 31). Does Colorado require the same kind of annual amendment filing?
22. 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 [See Rule 51-4.6 (IA) for a list of the “Books and Records” requirements pertaining to IAs].