If you're starting an RIA, you should know that the requirements for registration can differ by state. This article will outline the specific requirements for registering in the state of Colorado.
Who is required to register as an RIA in Colorado?
If an investment advisor is located in Colorado, has assets under $100 million, serves more than 5 clients, or actively solicits clients in Colorado, they are required to register with the state of Colorado as a registered investment advisor (RIA).
Key Takeaways from this article:
A compliance consultant can be a valuable resource in helping to prevent errors and providing peace of mind during the RIA registration process. If this isn't possible, it's essential to understand the financial statement and document requirements listed below.
Many states have licensing requirements or require advisors to hold specific designations, such as the Series 65, Series 66, and Series 7 combined, or a CFP, CFA, CIC, CHFC, or PFS.
In Colorado, each investment advisor representative must submit the Form U-4 and ADV Part 2B.
Financial statement requirements for RIAs in Colorado:
Each IRA must submit the Form U-4 and ADV Part 2B.
Required to pass Series 65, Series 66 & 7 combined or have the appropriate designation
To register in Colorado, advisors must meet certain licensing requirements. These enable financial professionals to become licensed advisors or planners in the state:
Series 66 and 7 combined
Or have CFP, CFA, CIC, ChFC, or PFS designation
Forms & Policies required by Colorado
Filing with Finra
To file an application as an RIA, firms must apply to FINRA for an account to their WebCRD/IARD online system. Colorado uses this system to process RIA registration applications, although RIA firms are not regulated or supervised by FINRA.
In addition to the FINRA entitlement paperwork, independent registered advisors must pay all state of Colorado registration filing fees and complete the following documentation:
Form ADV Part 1 (online portion)
This is the online piece of a firm's registration documentation. It consists of information about the advisor's firm. Advisors will detail the business and ownership structure, any affiliations related to business practices, clients, and additional information about employees. In other words, this is where an advisor discloses how the RIA runs their business.
Also, advisors will use part one to upload ADV part 2A and Part 2B.
Form ADV Part 2A (paper and online)
This is the firm's brochure that details the firm's services, fees, disciplinary disclosures, and other information about the firm. This brochure must be given to all clients and prospects. Colorado requires it to be written in plain English, so clients and prospects can easily understand it.
Form ADV Part 2B (paper and online)
This brochure is also required to be given to clients. This differs from Form ADV 2A because the advisor will disclose information about themselves. It contains educational history, employment, conflicts of interest, and disciplinary information.
Also, the state requires that any executive officers or anyone giving investment advice to clients must have a Form ADV part 2B.
Client Advisor Contract
In this contract, firms will include details of the relationship between an advisor and their clients. This contract must meet the regulatory authority standards for client advisory contracts in Colorado.
RIAs must provide this statement to clients at the start of their relationship and every year after that. It tells the clients how their information is stored, handled, and disclosed. Each RIA’s policy will be unique to its firm but must meet Colorado’s compliance requirements.
Policies and Procedures Manual
This manual is a guiding document that outlines a firm's internal policies on their business, including handling client complaints, training new IARs, etc. It also includes the firm's business continuity plan, information security policy, anti-money laundering policy, and anti-insider trading policy.
Code of Ethics
This filing shows the state of Colorado that you are meeting their ethic standards when conducting business.
It may seem challenging to start an RIA in Colorado. However, the process can be made much easier with the right resources. If you want to learn more about creating an RIA in Colorado, consider downloading a comprehensive launch kit. It provides you with valuable information and guidance as you navigate the process.
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