Colorado § 11-51-402 - Exempt broker-dealers, sales representatives - sanctions - exempt investment advisers, federal covered advisers, and investment adviser representatives.

§ 11-51-402. Exempt broker-dealers, sales representatives - sanctions - exempt investment advisers, federal covered advisers, and investment adviser representatives.

(1) The following broker-dealers are exempt from the license requirement of section 11-51-401 (1):

(a) A broker-dealer who is registered as a broker-dealer under the federal "Securities Exchange Act of 1934" and has no place of business in this state if the business transacted in this state as a broker-dealer is exclusively with the following:

(I) Issuers in transactions involving their own securities;

(II) Other broker-dealers licensed or exempt from licensing under this article, except when the broker-dealer is acting as a clearing broker-dealer for such other broker-dealers;

(III) Financial or institutional investors;

(IV) Individuals who are existing customers of the broker-dealer and whose principal places of residence are not in this state;

(V) During any twelve consecutive months, not more than five persons in this state, excluding persons described in subparagraphs (I) to (IV) of this paragraph (a);

(b) Other broker-dealers the securities commissioner by rule or order exempts; and

(c) An online intermediary operating pursuant to section 11-51-308.5.

(2) The following sales representatives are exempt from the license requirement of section 11-51-401 (1):

(a) A sales representative employed or otherwise engaged by a broker-dealer exempt under subsection (1) of this section;

(b) A sales representative employed or otherwise engaged by an issuer in effecting transactions only in securities exempted by section 11-51-307 (1)(a) to (1)(d) or (1)(j);

(c) A sales representative employed by an issuer in effecting transactions only with employees, partners, officers, or directors of the issuer or of a parent or subsidiaries of the issuer, if no commission or other similar compensation is paid or given directly or indirectly to the sales representative for soliciting an employee, partner, officer, or director in this state; and

(d) Other sales representatives the securities commissioner by rule or order exempts.

(3) Any real estate broker or salesperson licensed pursuant to part 2 of article 10 of title 12 who is trading only in securities comprised of notes, bonds, or evidences of indebtedness secured by mortgages or deeds of trust upon real estate, where the broker or salesperson acts as the agent for the buyer or seller of the real estate securing the note, bond, or evidence of indebtedness being traded and is neither the issuer nor affiliated with or under the direct or indirect control of the issuer or an affiliate of the issuer of the note, bond, or evidence of indebtedness, is exempt from the license requirement of section 11-51-401 (1).

(4) (a) The securities commissioner may by order revoke, suspend, or impose conditions upon exemptions available pursuant to subparagraph (III) of paragraph (a) of subsection (1) of this section and paragraph (a) of subsection (2) of this section if the securities commissioner finds that a broker-dealer or sales representative who has an exemption pursuant to either of said sections offered or sold, other than in an unsolicited transaction, to a public entity in the state of Colorado a financial instrument that such broker-dealer or sales representative knew or should have known does not qualify for sale to the public entity pursuant to section 24-75-601.1, C.R.S., and that such action by the securities commissioner is in the public interest.

(b) Any proceeding concerning an order made pursuant to this subsection (4) shall be conducted as a proceeding under section 11-51-606 (1), (2), (4), and (5).

(5) The following investment advisers and federal covered advisers with no place of business in this state are exempt from the license requirement of section 11-51-401 (1.5) and the notice filing requirements of section 11-51-401 (1.6):

(a) An investment adviser or a federal covered adviser who:

(I) Is exempt from registration as an investment adviser pursuant to section 203 (b) of the federal "Investment Advisers Act of 1940";

(II) Has only clients in this state that are: Other investment advisers; federal covered advisers; broker-dealers; depository institutions; insurance companies; employee benefit plans with assets of not less than one million dollars; or other institutional investors other than any local government investment pool trust fund under article 75 of title 24, C.R.S., as are designated by rule or order of the securities commissioner; or

(III) During the preceding twelve-month period, has had not more than five clients other than those specified in subparagraph (II) of this paragraph (a).

(b) The commissioner may by rule or order exempt other investment advisers from the license requirement of section 11-51-401 (1.5).

(6) Investment adviser representatives employed by or otherwise associated with an investment adviser or federal covered adviser, if either is exempt under subsection (5) of this section, are exempt from the license requirement of section 11-51-401 (1.5) and the notice filing requirements of section 11-51-401 (1.6).

Source: L. 90: Entire article R&RE, p. 721, § 1, effective July 1. L. 95: (4) added, p. 773, § 2, effective May 24. L. 98: (5) and (6) added, p. 550, § 5, effective January 1, 1999. L. 99: (6) amended, p. 619, §10, effective August 4. L. 2003: (3) amended, p. 1988, § 23, effective May 22. L. 2015: IP(1), (1)(a)(V), and (1)(b) amended and (1)(c) added, (HB 15-1246), ch. 98, p. 287, § 3, effective August 5. L. 2019: (3) amended, (HB 19-1172), ch. 136, p. 1659, § 59, effective October 1. L. 2026: IP(5), IP(5)(a), and (6) amended, (HB 26-1188), ch. 229, p. 1332, § 8, effective August 12.

Editor's note: (1) This section is similar to former § 11-51-105 as it existed prior to 1990.

(2) Section 14(2) of chapter 229 (HB 26-1188), Session Laws of Colorado 2026, provides that the act changing this section applies to cease-and-desist orders and summary suspension orders issued on or after August 12, 2026.

Cross references: For the "Securities Exchange Act of 1934", see Pub.L. 73-291, codified at 15 U.S.C. § 78a et seq.; for the "Investment Advisers Act of 1940", see Pub.L. 76-768, codified at 15 U.S.C. § 80b-1 et seq.

ANNOTATION

Law reviews. For article, "Dodd Frank Act Expands Federal and State Regulation of Investment Advisers", see 40 Colo. Law. 15 (Feb. 2011).