New Rules Under The Colorado Securities Act Now Effective by Herrick K. Lidstone, Jr.

New Rules Under The Colorado Securities Act Now Effective

By Herrick K. Lidstone, Jr., Burns, Figa & Will, P.C.

1. Introduction

The Colorado Securities Act, found at C.R.S. § 11-51-101 et seq. (the “CSA”), is administered by the Securities Commissioner (C.R.S. § 11-51-701) subject to the oversight of the Colorado Securities Board (C.R.S. § 11-51-702.5(4). The CSA, like securities acts in many other states has a broad applicability to “securities” and requires the availability of a registration or an exemption from registration before securities are offered or sold to investors in or from Colorado; it requires the licensing of broker-dealers, investment advisers, and their representatives involved in securities transactions in Colorado; and the CSA provides significant enforcement powers to the Commissioner including bringing cease and desist actions (C.R.S. § 11-51-606(1.5)), or civil or administrative enforcement actions (C.R.S. § 11-51-601, -602, and -606). Under C.R.S. § 11-51-603, the Commissioner may refer evidence of a violation of the CSA that constitutes a felony or misdemeanor to the attorney general’s office or the appropriate district attorney for consideration of prosecution.

The Commissioner has adopted rules interpreting the CSA which are found at 3 CCR 704-1, available through the Colorado Secretary of State’s website. C.R.S. § 24-4-103(11) requires that the Secretary of State maintain the official publication of the state’s administrative rules. The Securities Division has also maintained its “Notice of Proposed Rulemaking,” “Draft Statement of Basis and Purpose” for the rulemaking (dated March 6, 2017), and the redlined rule changes as originally proposed on the Division of Securities website (Rulemaking Combined Notice_3-31-17.pdf, available at https://www.colorado.gov/pacific/dora/rulemaking-noticesopinions (last reviewed August 7, 2017).

On July 15, 2017, the new rules under the CSA became effective. While the republication included many unchanged rules, there were substantive updates which will be discussed in this memorandum.

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