On March 30, 2012, the Colorado Division of Securities issued an order (the “Order”) clarifying that, with some notable exceptions, investment advisers meeting the requirements of the federal exemptions for family office advisers, venture capital fund advisers, and foreign private advisers will be exempt from the adviser licensing requirements of the Colorado Securities Act.

The federal Investment Advisers Act of 1940 (the “Advisers Act”) currently exempts investment advisers to “family offices,” “venture capital funds” and “foreign private advisers” from registering as advisers at the federal level with the Securities and Exchange Commission. In contrast to the Advisers Act exemptions, however, the availability of the Colorado exemptions is conditioned on the adviser not being subject to certain disqualification provisions under federal and Colorado law. These provisions include, among other things, prior judicial and administrative proceedings or regulatory sanctions.

The federal level exemptions available to family office advisers, venture capital fund advisers, and foreign private advisers, as well as the definitions governing the availability of those exemptions, are described in Sections 202 and 203 of the Advisers Act, as well as the related rules. Under the Order, the following advisers are exempt from the Colorado investment adviser licensing requirements:

  1. Any investment adviser to a “family office” as defined under the Advisers Act;
  2. Any investment adviser that is a “foreign private adviser” as defined under the Advisers Act; and
  3. Any investment adviser who is exempt under the Advisers Act because its clients are solely “venture capital funds” as defined under the Advisers Act.

An investment adviser relying on the federal Advisers Act venture capital fund adviser exemption will generally have to file periodic reports with the SEC as an “exempt reporting adviser.” The Order makes clear that an adviser relying on the corresponding Colorado exemption will not be required to make those reports available to the Colorado Division of Securities.

A link to the Order can be found here.