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As an investment adviser in Colorado, staying on top of the latest regulations is crucial for running a successful and compliant business. The Colorado Division of Securities recently released its 2024 Investment Adviser Examination Priorities, outlining key areas of focus for their upcoming examinations.
While some of these updates align with national trends, others are unique to Colorado. Let’s break down the essential changes and what they mean for you.
1. Written Suitability Information
Rule 51-4.6(IA)(17) emphasizes the importance of maintaining thorough written information about each client’s suitability for specific investments. This is especially crucial for riskier strategies or unconventional recommendations.
2. Continuing Education & Unfair Dealings
Another critical update is the introduction of a continuing education requirement for all licensed investment adviser representatives under 51-4.4.1(IA). This requirement, which took effect in 2024, aligns with the North American Securities Administrators Association (“NASAA”) model rule, highlighting the importance of ongoing professional development for individuals in the industry.
Moreover, amendments to 51-4.7(C) incorporate U.S. Securities & Exchange Commission Regulation Best Interest (Reg BI), emphasizing the prohibition of unfair and dishonest dealings. Dually-licensed representatives must be particularly vigilant about their obligations regarding products recommended through their broker-dealers.
3. Books & Records Rules Revamped
The Books and Records Rules (51-4.6(IA)) see significant updates. Firms with nondiscretionary trading authority must document client approval of trades, including the date and method. The inclusion of invoices expands the documentation scope beyond bills and statements.
4. Dishonest & Unethical Conduct Rules
Rule 51-4.8(IA)(P) clarifies the information firms must disclose in investment advisory contracts. It mandates written contracts that disclose services, contract terms, advisory fees, fee computation formulas, prepaid fee details, discretionary power, and restrictions on contract assignment. Transparency is key!
5. New Investment Adviser Written Policies & Procedures Rules
Rule 51-4.12(IA) introduces new requirements for written policies and procedures. Firms must establish, maintain, and enforce written policies covering compliance, supervision, physical and cyber security, a code of ethics, material nonpublic information, and business continuity and succession planning.
Firms are also obligated to review the adequacy of these policies and procedures annually, adopting a NASAA model rule. Additionally, a chief compliance officer (CCO) must be designated. The CCO must be registered as an investment adviser representative and possess the authority and resources to develop and enforce the firm’s policies and procedures.
View The Full 2024 Priorities List Here.
Staying Ahead Of The Curve
These updates reflect the evolving regulatory landscape and emphasize transparency, accountability, and client protection. By staying informed and proactive, you can keep your Colorado investment adviser business compliant and thrive in the years to come. Remember:
- These changes are for Colorado only. Keep an eye on your state’s specific regulations.
- Proactive compliance is key. Don’t wait for an exam to get your house in order.
- Resources are available! Check out AdvisorLaw’s Compliance and Outsourced Chief Compliance services.
- By taking these steps, you can navigate the changing regulatory environment with confidence and continue to serve your clients effectively.
Elevate Your Compliance: AdvisorLaw’s Comprehensive Solutions
Staying compliant can feel like a full-time job, especially when state regulations vary. That’s where AdvisorLaw comes in — our team of securities attorneys and certified compliance professionals is laser-focused on state-registered RIAs. We speak your language, understand your challenges, and can help you:
- decipher the nuances of your state’s specific regulations;
- develop and implement compliant policies and procedures;
- streamline your recordkeeping and documentation processes; and
- stay ahead of the curve with ongoing compliance updates.