Colorado Legislative Council Staff
NO FISCAL IMPACT
February 6, 1998
House Business Affairs
Will Meyer (866-4976)
TITLE: CONCERNING REGULATION UNDER THE ‘COLORADO SECURITIES ACT” OF PERSONS OFFERING INVESTMENT ADVISORY SERVICES.
Summary of Assessment
The provisions of this bill would require persons who offer investment advisory services as investment advisers and investment adviser representatives to be licensed by the Division of Securities, Department of Regulatory Agencies. This bill would become effective upon signature of the Governor. Sections 1, 2, 3, 6, 7, and 22 would become effective upon signature. The remainder of the bill would become effective January 1, 1999. The bill would prohibit investment advisers (companies) from hiring investment adviser representatives (representatives) who are not licensed with the division. The bill would grandfather all investment advisers and investment adviser representatives (except those with a serious disciplinary history) currently doing business in Colorado. The bill also would grant the division the authority to examine records of licensees, define fraudulent activities, and provide for civil penalties.
The division currently licenses approximately 76,900 sales representatives/broker dealers who renew their licenses annually. The bill would result in an increase in the number of persons licensed by the division by an estimated 3,150 persons consisting of 650 companies and 2,500 individual representatives. License fees would be set by the Security Commissioner. The current annual license fee is $13 for individual sales representatives and $90 for broker dealers. These fees would be decreased by $1 to $4 to offset the additional revenues that would result from licensing investment advisers and investment adviser representatives. The provisions of this bill would not result in any net increase in revenues to the state.
The licensing of this new group of individuals would be accomplished by utilizing industry resources to complete the development of an acceptable basic competency and law knowledge exam that would be administered by a private vendor and a computerized licensing system that would be provided to the division free of charge. Current examiners and investigators would be trained in the investment advisory field in programs provided by the North American Securities Administrators Association “NASAA” and the U.S. Securities and Exchange Commission “SEC”. Oversight would be incorporated into the overall division’s licensee oversight program. It is not anticipated that this increase in the number of licensees would increase litigation costs. Under the licensing system, the “problem application” is usually withdrawn by the company prior to any agency action. Enforcement actions for unethical or dishonest practices or fraud would be prioritized with all other division enforcement actions. The division believes that it would not require any additional resources to implement the provisions of the bill. The bill would not affect any other agency of the state, or unit of local government. Therefore, this bill is assessed as having no fiscal impact.
Departments Contacted Regulatory Agencies